From Aspiring Journalist To Early Investor in Deliveroo and Darktrace w/ Hussein Kanji | Hoxton Ventures

Hussein Kanji: [00:00:00] The dot com bubble collapsed in the middle of it. And like our customer base got wiped out. Like it was, it was not a good story. And so then I needed a job, right? Because you, you know, you're effectively unemployed, right? Like that's when I got exposed to the venture community. And then I joined a venture fund here that I got introduced to by the same guy who turned me down and told me I should go get a job at Microsoft.

Hussein Kanji: There was a growing pool of startups. And there was no one willing to invest in them. So I said, let's go set up a venture fund.

Amardeep Parmar: Today we have on the podcast, Hussain Kanji, who's a partner at Hoxton Ventures. They invest in their pre seed and seed stages of companies which are creating new categories for themselves. In this podcast, we've run through Hussein's story from becoming, wanting to become a journalist as a child to then getting into the tech world in the early days, creating a web design agency, which was then acquired by KPMG and from there working in multiple tech roles before [00:01:00] eventually joining Venture through Excel and then eventually starting his own firm with his partners at Hoxton Ventures.

Amardeep Parmar: He was one of the early investors in companies such as Deliveroo and Darktrace. And we mentioned that at the end about how he was able to pick those companies and what he saw in them that enabled him to do so well. So Hussain, what you've done with your career is incredible, but obviously you started from somewhere.

Amardeep Parmar: So as a kid, what did you do? What were you, what did you believe you wanted to do? 

Hussein Kanji: I don't think I had any idea. I mean, I was pretty academic. I think a lot of, a lot of kids, especially like their parents encouraged them to, to do that. And so it was like classic, take lots of math and science classes, you know, do the, in the U.S

Hussein Kanji: We have these things called AP exams, which are like advanced placement exams. So take a lot of AP classes. I had no idea what the world of work look like. I just knew what the world of education looked like. And so the goal was go to a good school, go to an Ivy league, et cetera. I liked writing. And so I was the editor of the school paper for a while.[00:02:00] 

Hussein Kanji: I really wanted to work at the New York times. And when I went to Stanford, I ended up becoming a writer on the paper there as well. And so I think, I think I probably would have ended up on the journalism track, uh, if it wasn't for the tech industry, like that would have probably been the closest thing. 

Hussein Kanji: I spent one really awkward bad summer at Merrill Lynch between high school and college. So between secondary school and university. And I was on a derivatives floor. And the one thing you are oblivious to, especially if you come from like pretty middle class, like, like upbringings is I did not realize how much money people were making on this derivatives floor.

Hussein Kanji: So what I just knew is like, it was a very frat boy culture. I didn't particularly like it. You, you got lots of dinners cause they would work you really late at night. So like my, my experience is like an impressionable 17 year old does you work super late until like one in the morning they feed you and take care of you and like send you in a car home, which is like, nice.

Hussein Kanji: The people are kind of stupid. Um, and they're, it's kind of [00:03:00] a frat boy culture and I don't understand why anyone would want this job. And like I walked and I was like, you're, you're, you're like for someone who derivatives are usually a little bit more mathematical. Like you basically just use algebra.

Hussein Kanji: Like it's like doing a little bit of stuff in Excel. I was like, this is kind of like a shitty job. I don't think I want this like for my career. And I've ruled it out. So like freshman summer, sophomore summer, like junior summer in university, I was like, I don't want to go to Wall Street because I, I did that in high school.

Hussein Kanji: And like, it wasn't fun. Completely oblivious to the fact and how much people take home, which is probably what makes the job fun for them, even though the actual job wasn't that fun. 

Amardeep Parmar: It's kind of interesting to see. So many people from Asian backgrounds are pushed towards those kind of careers and it's a measure of success, right?

Amardeep Parmar: You work at Merrill Lynch, you're successful, and you were going to think about more journalism route, which traditionally is not as well paid, for example, and people maybe look down on the community. Did you have any challenges of that where you were saying, Oh, I want to become a journalist after working at Merrill Lynch and people were like.

Hussein Kanji: No, not really. So my, my [00:04:00] mom, I think, again, we were reasonably oblivious to this. So my, my mom's only rule, because my, my mom is a school teacher. My grandfather is a school teacher. My great grandfather is a school teacher. My uncle's a school teacher. So my mom was like, whatever you do, you're not going into education.

Hussein Kanji: Like, you can be a university professor, but you can't be like a school teacher because you get, you get, you get paid nothing and you have no real standing and everyone takes you like, no one takes you seriously. Like they're really under, they're, they're under appreciated for what they do. And so don't do that.

Hussein Kanji: Everything else is like free game. And so a lot of Asian parents, I think will say like, go be a lawyer, go be a doctor, like go, go be an accountant, go be an engineer. Like, you know, there's like the, there's like a hierarchy. Uh, it probably starts with doctor at the top. I had very little in medicine and my mom never pushed me for, for any of these things.

Hussein Kanji: So I was pretty free. I think the only thing my mom wanted me to do is like go to really good schools and then your life kind of gets sorted out. And I, you know, I don't think like working at the New York times, like it, that was [00:05:00] my dream. That wasn't a bad thing in any kind of way. ‘Cause that was like a, a known publication.

Hussein Kanji: That would be a good use of like, you know, like intellectual ability. 

Amardeep Parmar: And so obviously you didn't go down like that path. You're not doing that path today. What changed? Like you were really enjoying journalism. You loved writing. 

Hussein Kanji: Yeah. 

Amardeep Parmar: Why aren't you a writer today? 

Hussein Kanji: Yes, I almost did. So when I got to Stanford, there was a strike, uh, among, so basically in the, in the school paper, you know, the, the super senior people or the editors like by age, right?

Hussein Kanji: So the seniors in the university, the juniors, like the next layer of, of editors, the sophomores are kind of the writers. That's the second year. And then the freshmen are like the peons and then you get to do very much, you know, other than maybe like turn up and once in a while they might get an assignment.

Hussein Kanji: Somehow there was like a strike between the sophomores and the juniors and they all quit. So there were a bunch of like super senior people, uh, like as in like senior, they were about to, you know, graduate. They were like that close. And then a bunch of freshmen and we, we unionized, uh, like I think this, [00:06:00] we called ourselves the freshmen coalition and we were like within this paper and we wrote

Hussein Kanji: something like between one to four articles a day, like, which was like, we, we produced most of the paper, which is why we kind of unionized. There were four of us who kind this. We're so much.

Amardeep Parmar:  it’s a union with four people,

Hussein Kanji: Yeah, four people were like super troublemakers. Uh, one's a partner at Goldman Sachs.

Hussein Kanji: Now one ends up writing like the movie. He's like a movie critic or a theater critic in New York. Another one's gotten to journalism. And then I stayed, I went into tech and then my freshman summer ‘cause there's obviously no paper in the summer. And that's what I probably would have loved to go back to New York and like intern at the times.

Hussein Kanji: But I ended up interning at a, at a very early, it was like a multimedia studio, which back then there was a shift from CD ROMs, like really dates me, like CD ROMs to the web. And all these people used to produce content for CD ROMs or repurposing themselves as maybe not all, but like a handful of them, like the, the, the leading players were repurposing themselves [00:07:00] to be like more

Hussein Kanji: Digital and more web Netscape came out my first year of university, which is like very early into the, into the career. And so this is all like super raw, like the, you know, the web was just kind of sort of getting kind of built. And I interned at one of these places, you know, we were in like a garment factory, uh, there were like Vietnamese garment workers below us.

Hussein Kanji: And then above us was, was hot wired, which was wired magazines, digital presence. And so, you know, you were like right in the Thick of things. And this is South Park, San Francisco, which is now like, it's like a big center for tech. But back then was like, it was basically like web design agency and garment workers, like lots of garment workers and these big like warehouses.

Hussein Kanji: And then a few digital people who were, who were doing web type stuff, but you get to meet everybody. It's a really small community. Like in general tech is a very small community and so you get to meet everybody. And so another group of folks are like, we should start our own agency. And so I, I ended up joining them my sophomore year and then it was really hard to juggle like

Hussein Kanji: doing the work and doing [00:08:00] school and doing the paper. And so I gave up my, my editorship, like in the paper, like halfway through the year, um, because I just couldn't handle the load. And, and, and then we were in that, that agency started in Palo Alto moved to San Francisco and San Francisco and Palo Alto, like Stanford and San Francisco are about an hour away.

Hussein Kanji: And I had a car, but like there's a lot of traffic. And so I would take the Cal train and nowadays like all these tech workers, like it's very normal to take the Cal train back then. No one took the Cal train. Like it was like, it was like the ghetto train. Like, you know, like so I would cycle from my dorm to the Cal train and then take the Cal train for like 45 minutes or an hour to San Francisco, do a bunch of stuff and then cycle back.

Hussein Kanji: At one point I started living in San Francisco cause it was like a pain in the ass to just go back and forth. But it completely derailed my university experience. And then a year after we found that maybe like a year and a half after we found that we ended up getting acquired by KPMG, which merges in with a bunch of other stuff and became like their digital services arm for, for like web infrastructure, web design, et cetera.

Hussein Kanji: And we also wrote a book in 1995. This is like, [00:09:00] like one of the first things that we did. As a group. So I'm like the second author. If you open up the page, like on the inside, you see my name. This is like pretty cool. If you're an 18 year old, but the book, like transformed the way websites got built. So back then everything was very gray with these like lines.

Hussein Kanji: ‘Cause you could put like these like line breaks between things. And then at one point you can make them multicolored because Netscape came up with a tag that let you do that. And, and they had just introduced tables, which were like to basically put data in a spreadsheet type things. And we turned the tables on and we visibly turned them off.

Hussein Kanji: And then we turned them into a grid and then we use the grid to do the designs. And no one else had like literally no one else in the world that figured this out. Like the first people to figure it out, we wrote a book on this and it transformed the way everybody built websites in 1995 because you completely broke the structure of HTML, which is supposed to be like this markup language and content and, and, and styles are supposed to be different.

Hussein Kanji: And there was no CSS, you know, so we ended up on the web three standards committee, like a whole bunch of stuff because we, we like, and so you're like. You're literally like in [00:10:00] the thick of, you know, you're 18 years old and like you're in the thick of things. Like at one point I rented rack space from this little like hole in the wall closet that sandwiched between like a shop and a mosque.

Hussein Kanji: And it was the, the, the server space was run by John G and Andrea. John is now the VP of software engineering at Apple. Like, you know, he went on to go form like a couple of companies. It was like early at Netscape and he was running this closet, like, like rack space, like server space. There's a pre AWS, like we actually had physical servers.

Hussein Kanji: And so like you just got super networked in the industry at like the age of like 18. And then that became your industry. Like, and I didn't have fun in Wall Street, so like, I didn't want to go to New York to work in finance. And so like, the tech industry became the big thing. 

Amardeep Parmar: So it's interesting because you had quite a big identity shift in that period, right?

Amardeep Parmar: Of like, you loved the journalism, you were writing like four articles a day. And then you gave it all up for this side of things, which I guess you didn't know about before. What was it that you loved so much about it? Why did you make that shift? 

Hussein Kanji: [00:11:00]Well, I, I mean, I loved the work, though the work was like fun, like doing all these things where it was like intellectually, like engaging, you know, the hard part was like juggling school at the same time.

Hussein Kanji: And then the one commitment that I couldn't do was like, I couldn't write for the paper. 

Amardeep Parmar: Is that a hard decision to make or you're just loving what you're doing so much?  Or it's easy?

Hussein Kanji: One of these things where like, you know, one, one, one thing subsumes everything else. And that, that became, I mean, that became life.

Hussein Kanji: Um, and so yeah, you, you know, the industry and the tech industry, and then, you know, you do hear about all the, all the upside stories, like, ‘cause you know, it was, it was the beginnings of the dot com boom. So like people were starting to do really well. And so, you know, you're, you're kind of in the middle of it, right?

Hussein Kanji: So people invite you into things and like you're hearing about a lot of stuff. Yeah. So, but you're also very young in your career. So to be fair, you actually don't know very much, which you don't know at the time, because you probably think, you know, a lot more than you do. But on the other hand, because no one else is doing it, you actually probably know more than most people.

Hussein Kanji: But, but you're probably not, you know, you're, you're learning pace is probably not as high as it [00:12:00] should be because someone who's got experience can learn a lot of this stuff much faster than take it to the next level. You're still learning stuff. Kind of by doing and kind of cobbling to get like cobbling things together, but but you're in it. So, you know you you end up kind of learning alongside the industry.

Hussein Kanji: It was a it was a fun experience

Amardeep Parmar: Oh, so once you got acquired by a KPMG, then you've got a path then into Hoxton Ventures, right? What happened in that journey then? 

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Hussein Kanji: Yeah, no, no, not really.

Amardeep Parmar: What's that gap? 

Hussein Kanji: So after, after that. 

Amardeep Parmar: So, I mean, there's a little gap there of like, you've did, there's a  few things a bit.

Hussein Kanji: There's a big gap. Yeah. It was like, it was like a dead, like a more than a decade. So I ended up getting recruited by Sun Microsystems, which was the big server company of the, of that time. Like, uh, they built all the machines that pretty much the entire web ran on. And they had an advanced technology team, uh, and there were six distinguished engineers on my advanced technology team.

Hussein Kanji: And then me and one other person, the one other person was BJ Fogg, who runs a research lab at Stanford called Keptology. Like when you see these like people who build like [00:13:00] apps that like news feeds for dopamine hits and like to get you addicted to this, to the software. Well, that, that's all the mostly BJ students.

Hussein Kanji: Cause that's what he was studying the mechanics of this stuff. So he was largely doing his PhD in postdoc in this advanced technology group, like running his experiments, et cetera. Then there's me. It was like a free agent, six distinguished engineers. It was great. I was there for like two years. They're really relaxed about everything in terms of like, like actual work output.

Hussein Kanji: They just wanted smart minds in one spot, you know, you find problems to go work on. So that's what, that's what I did, but there wasn't that much like to do there. And so then I ended up going back to startup stuff and trying to build a company again. And that was after that, and I think we used all the savings that we'd made from the first company to do the second company, the second company didn't go anywhere.

Hussein Kanji: The dot com bubble collapsed in the middle of it. And like our customer base got wiped out. Like it was, it was not a good story. And so then I needed a job, right? Because you, you know, you're, you're effectively unemployed. Right. And like, you've spent all your money that you made it in the first. So you're now poor again as well. So like..

Amardeep Parmar: [00:14:00] So what was it like at that point of like, you have this, like at 18, you've got this massive success. 

Hussein Kanji:  Yeah.

Amardeep Parmar: You're on top of the world. You're, you've got your name in a book. 

Hussein Kanji:  Yeah.

Amardeep Parmar: Then you get, you're talking to it network amongst all these amazing people then I guess at that point in the second company for like I can do anything. 

Hussein Kanji:  Yeah.

Amardeep Parmar: And then take that, take it away from you. 

Amardeep Parmar: Like now I'm broke again. I need a job. 

Hussein Kanji:  Yeah.

Amardeep Parmar: How was that mentally, emotionally? 

Hussein Kanji: Well, it was not, it was not particularly pleasant. I mean, the only good news was like a lot of people were going, like, it wasn't just us going bust. It was a whole dot com collapse. You know, we. In hindsight, we're probably six months or nine months too late, had we started a little bit earlier, we probably would have been able to rise with the noise.

Hussein Kanji: And the idea wasn't all that great. I think that's what we realized because there were a lot of really bad ideas in the dot com bubble that got funded. We probably missed the funding window because we're a little bit too on the back foot for that. Uh, and I think if we were six months, nine months earlier, we could probably raise like 10 million, 20 million, whatever.

Hussein Kanji: Uh, but we couldn't do that. And in hindsight, and not even in hindsight, like the day, like you're [00:15:00] shutting down, like so like in the, in the, still in the moment, but on the, on the back end of the story, you kind of know that you have a dumb idea, you know, that everyone else's idea was kind of stupid, like in the dot com bubble and you know, your idea is also not that different, like in terms of this stuff.

Hussein Kanji: Yeah. The only, the only regret is you spent all your money, which is like, I find a painful lesson to not like in risk management. Like, and you're now unemployed. The good news about the unemployed bit is you can get employed. Like, that's not so hard. And the problem is the industry was collapsing at that point.

Hussein Kanji: So there weren't as many jobs, but one of my advisors pulled me in and said, I'm doing a company. He'd sold his business. He sold his first business was $380 million. It was like no venture money. Pretty much mostly went to him. He then decided to do not one, not two, but three different companies at the same time, which is like part of this exuberance right in, in California, in the middle of the boom, people did stuff like this because you attribute all of your [00:16:00] success, not to being in the right place at the right time.

Hussein Kanji: But like, you know, you're really good. So like you should be able to do like multiple things at the same time. So I joined one of his companies, which is like his main company. We raised a bunch of money from the venture community. Uh, all in all about $35 million and the company didn't go anywhere. It was like generously, probably

Hussein Kanji: way ahead of its time and probably not so generously like a bit of a mess, like internally, almost all the people in the company were exceptionally good. So if you look at like the path of all these people, they all ended up like in lots of really like good positions like over time and became pretty influential in the industry.

Hussein Kanji: Which is, which is good. But the company didn't go anywhere and it was like, that's when I got exposed to the venture community because first business wasn't venture back. Second business wasn't venture back. Now this time, like there was vent and I was like, that's a cool job. Like, you know, like you get to meet all the companies, you get to decide which ones get money and then you kind of hang around and try and help them out.

Hussein Kanji: And so then I interviewed with a bunch of venture funds and it's hard to get a [00:17:00] venture job like in general, it's a very small industry. And one of the firms that interviewed with, uh, the, the partner there who who then did me a solid, like a, like a decade later was like, look, you're a bright guy. If we bring you into the firm, we will hire you as a younger person.

Hussein Kanji: There is no career track from a younger person to a senior person. These firms are not wired that way. Like they're partnerships and you have to be invited into the partnership. You can't work your way up through the partnership. You can, but it's like such an exception. So the likely scenario for you is you come in, you spend a couple of years and we'll kick you out and we'll tell you to go get more operating experience and you'll go learn how.

Hussein Kanji: And he's like, if I look at your background, putting aside the sun stuff where you basically didn't do that much in terms, like it wasn't like a line operating role. It was like a strategic role. You should go learn how a big company runs itself. So if I was in your shoes, instead of coming and interviewing here, I would go work for a big company and learn the systems processes, like [00:18:00] go learn, like what a grownup company actually looks like.

Hussein Kanji: And so he was like, you know, let's make a list of like the grownup software companies, ‘cause that's your background, you know, who are, who are digital. You know, you had Adobe, this is like a long time ago, right? So this is like pre, almost pre Google, Google had just been formed. So like it was Adobe, it was Oracle.

Hussein Kanji: It was Microsoft, like there wasn't a huge list. And this is like post dot com collapse. Like, you know, you don't want to be at a server company because it's not a software company. Like Oracle is very much of a sales culture, so you probably don't want to be a product manager at a sales organization.

Hussein Kanji: Adobe felt like, yes, like a dinosaur. Like they hadn't done the transformation to the cloud. Like it really did feel like a dinosaur. And then Microsoft was like top of the, like top of the world back then. So I was like, I'll go to Microsoft. So I ended up, uh, like ended up the founder of that company. Uh, That, that was a bit of a, like, it was a bit of a mess that raised 35 million, introduced me to a former, uh, colleague of his, who's also VP at SGI, which was like the hot company back in the day.

Hussein Kanji: And Kaifu ended up pulling me up to, to Microsoft, ended up doing a [00:19:00] bunch of stuff for Microsoft. I spent four years there. I had a good time. I thought I'd last one year because younger guy had done all these things, didn't really have all that much in the way of career stability, right? Like was to what was like easily tugged by other projects.

Hussein Kanji: And so we'd get bored, right? This was like my background and.

Amardeep Parmar: What kept you that then?

Hussein Kanji: Actually that. Uh, so I actually had a, I actually had a lot of fun, like, you know, it was, it was a big company. You know, it was obvious even at the time that like 30 percent of the company should be fired, like which Satya ended up doing like again, a long time later, but it was like this huge middle layer of like, there are all these people at Microsoft who joined, they mostly hire in their twenties.

Hussein Kanji: They hire young people like straight out of university, straight out of master's programs, et cetera. And, you know, Microsoft had its like heyday from like 85 to like, you know, I mean, still going, but like 85 is like when, when the machine really started to go. So, you know, you joined in your, in, in the mid eighties, maybe the early nineties out of [00:20:00] university.

Hussein Kanji: So by the time you're in 2000, you were like in your thirties, maybe your late thirties, maybe your early forties. If you were like a super bright person at Microsoft, like a, like a true rising star, because the whole ship was rising, right? You would have gone up the ranks and climbed up the corporate ranks.

Hussein Kanji: And if you look at like Bill Gates or like bomber or like all like Eric Rudder, there are a whole bunch of these executives around them. They're all mostly younger, like younger bet. And they weren't like in their 50s, 60s because it was all grown up from within the organization and it all started like in their 20s.

Hussein Kanji: So that's where the superstars went. By the time like 2005 rolled around, those superstars had been there since like the mid 80s or the early 90s, maybe the mid 90s and they were ready to retire. Or go do something else. So there was a whole like exodus of Microsoft of this, like super senior talent that went off to do other things.

Hussein Kanji: They largely didn't go do other companies. They just kind of sort of retired and went to go do other activities. And then you had all the younger intake, like the graduates [00:21:00] from Waterloo or Stanford or MIT who are like at the bottom, like, because they're just starting their careers. So they're like these people, but like, you know, 20 years, like later, and then you had all the middle managers in between.

Hussein Kanji: So these are by definition, the people who are not the rising stars, because if they were the rising stars, it would have gone up to the top, but they're in their forties and their families don't want them at home. So they're forced to go to work. And some of them had tried to like work at home, like, or tried to like.

Hussein Kanji: pull back from Microsoft and just be like, you know, we made enough money. We've paid the mortgage. Like we're not like gazillionaires ‘cause we weren't the rising stars, but we've made like the stocks done really well. Like we don't like we're financially well enough. Like we probably need a job of some kind, but we don't need like a super high paying job because, and you know, again, most of these were men, the wives that I could get out of the house, like you're driving us nuts.

Hussein Kanji: So they would end up back at Microsoft and there was this whole like layer of cruft. The problem with cruft is if you're younger and a rising star, you can't get [00:22:00] past the cruft because the cruft wants to preserve its jobs because you know, they don't, they're not, they know that they're not moving up.

Hussein Kanji: They definitely don't want to go down. So they're just like occupying all these in Microsoft. It was like VPs at the top and like, you know, no title at the bottom and then directors and general managers and product unit managers, like in the middle, all of. And all of this was mostly cruft with like maybe 10 percent as like the next rising star batch.

Hussein Kanji: It was kind of breaking through the cruft and I was lucky. I was like in, in, in this leadership program. So I was kind of breaking through. So it was good. But the negative for, for Microsoft was like, it was organizationally like a pretty bad organization. And so even then that got, that got, that would, that would be the biggest frustration.

Hussein Kanji: I think if it was like the Microsoft of the nineties, I would have stayed there for like the rest of my career because like, you know, you would have been in like, and in the two thousands of Microsoft was not, the stock was flat. Like it wasn't going anywhere. It wasn't like Microsoft hadn't reinvented itself the way it did now.

Hussein Kanji: And it was going to take like, [00:23:00] it's going to take some pretty seismic changes to do that. And so eventually I was like, this is, you can easily, you can, you can get very well taken care of, but you can easily get stuck in Microsoft. And you could see all the people who were stuck because that was the cruft.

Hussein Kanji: I was like, I don't want to be like them. Um, and so I ended up leaving and I moved out here to London and then I joined a venture fund here that I got introduced to by the same guy who turned me down and told me I should go get a job at Microsoft. He didn't say Microsoft specifically, but go work at a big company.

Hussein Kanji: And he like wrote a note behind, like, I didn't know this, but like, you know, behind the scenes he wrote to the partnership here and was like, this is a really bright guy who I met like a long time ago in an interview process. And like, he's now moving to London cause you send these emails and kind of these goodbye messages and you know, he was on the list of the message head.

Hussein Kanji: This is what I'm doing next. And then he basically, you know, what ended up happening is I went through like an extended interview process. And the next thing I know, these guys gave me a job and then I was in a venture fund. So like I [00:24:00] got to, I got to close the loop as you started like 10 years ago, kind of sort of through like this dumb luck.

Hussein Kanji: And then I spent, I juggled again and I juggled school and, and, and, and, and excel at the same time. I was in business school at the time and this was like second month of business school. And it was fun. I was in four years and it was very clear that the firm wanted to be much more of a growth oriented firm in a much like they, they just wanted to restructure a little bit.

Hussein Kanji: And I was like odd man out on that. And so, and there was a new lead. There's been a new leadership team and excel is a generational shift has happened. And so I went off and I interviewed. Interviewed. I mean, I went and knocked on the door of like all the other venture firms and there weren't very many venture firms at that time.

Hussein Kanji: So this is now 2010ish. Um, you know, so you have index and you have Balderton and most of the other venture firms that I would have named. They don't exist anymore.

Amardeep Parmar:  So what made you  want to stick in the UK for that? ‘Cause obviously you, you had that San Francisco background list. There's tons  of venture firms.

Hussein Kanji: Yeah. So I [00:25:00] talked to a bunch of people in San Francisco and, and in San Francisco and I wanted to stay in venture. Like that was a very clear thing. ‘Cause I liked the job at Axel. Like, and I liked investing and I thought I could get good at it. And so you needed a shop. that then believed in you to, to be able to let you take the chances, et cetera.

Hussein Kanji: So I talked to a bunch of people in the U S and again, remember, there's a very different era in 2010. Like the U S was much more parochial, you know, the Bay Area view of the world was all the innovation, like all the wealth creation happens here, this pre Facebook, right? So like it happens here. It doesn't happen anywhere else.

Hussein Kanji: Maybe, maybe it happens in Israel. You know, China is still arguable, India has been kind of a failed experiment, like, you know, it basically happens in the Bay Area. And so the consensus was like, and people literally told me this, is like, you used to be smart and then you moved to London and we're not sure about you anymore.

Hussein Kanji: Like, we don't know if you're [00:26:00] actually smart, uh, because why would you leave the world's best economy? Like, and specifically the best place in the world's best economy where you can do tech. We can kind of get our arms around the fact that you moved to Seattle because if you're going to learn big company stuff.

Hussein Kanji: Like Microsoft is a perfectly acceptable big company. They do things a little bit differently than people in the Bay Area. So maybe you picked up like bad Microsoft habits. But like it's a, it's a, no one will slight you for, for being in Seattle. But then why did you go to London? And so like, you must have like a weird travel bug.

Hussein Kanji: Like you must want to do other things. Maybe you want to be like lazy and European and just go on like really long holidays. Like, you know, that's like the mental frame that people in America had. And I'd come back and say, look, like there are very few venture firms in London, like empirically, like very few venture firms, most of which don't really understand risk the way people in Silicon Valley think about risk and post financial [00:27:00] crisis.

Hussein Kanji: Because at the financial, like the time of the financial crisis, the global financial crisis, two other things happen. Facebook released an API and the app store came out and they're almost as transformative, if not way more transformative than, than the financial crisis. But all three of them encourage entrepreneurship here because the, the, the app store and the Facebook API level, the playing field and build an app from anywhere and then distributed.

Hussein Kanji: And the global financial crisis meant there were no jobs. So you had no, you had no, no other work to do other than building apps or like, you know, and that's what happened at a lot of universities here. Like, so there was a, by 2010, if you were on the ground here, you could easily see that the culture was shifting.

Hussein Kanji: And then the platforms are making it easier for people to achieve success. Like it was only a matter of time before like king.com and candy crush became dominant. Like you could see the writing on the wall and you're trying to explain that to American folks in California. And like, they didn't get it.

Hussein Kanji: So the job offers I got [00:28:00] was like, look, and it was like, I had two job offers like this. We will bring you back. We will give you a salary. We will give you an office. We will not make you a partner. You can hang out with us as an EIR, as a venture partner. And a year or two from now when you can prove to us that you're one of us again, then we can talk about a career.

Hussein Kanji: It's like, I don't want to spend like a year or two explaining to people like, like I'm actually good at the job. And there's a whole bunch of stuff happening in London. So then I went and talked to the other, I talked to London firms. Again, there weren't that many. Most of the firms that you would talk to, they're, they're out of business.

Hussein Kanji: Like Eden and Pond, people don't even know who these firms are anymore because they started in 2000. And by 2010. You know, they'd raised three funds and their cycle was over and it was, they didn't have returns and they were, they were basically slow motion dying and that was the market here, which is, which is a great time to actually be a fund, right?

Hussein Kanji: Because like the old guard are going away and there should be then a new guard and the stuff on the ground is like changing in your favor. So you should be able to [00:29:00] actually invest really well. This was like basically the hypothesis for Oxfam. I talked to Index and Index was like very kind about this and they said, look, you're not a young person in terms like skill set anymore because you've paid your dues and like a very good.

Hussein Kanji: So, you know, you know the mechanics, but you're not like a rainmaker either. Uh, so it's not clear that you have any investment judgment or talent. You're somewhere in between. There is reasons to believe why you could grow into that, but you're, you're, you're stuck in the middle basically. We don't hire stuck in the middle people.

Hussein Kanji: Like if you're a rainmaker, we'd bring you in. If you're like a younger person, we could bring you in cause we need the work. But like you're in the middle, you don't, you won't want to do that work. So this is not the right home for you. I guess that's Index off the list. Balderton wouldn't even talk to me, so it was like Balderton's off the list.

Hussein Kanji: You know, Crandon and Nordstown were like in Sweden, like, I don't want to move to Sweden. Like, you know, so I didn't even go talk to them. There were a bunch of German funds, you know, so they were like, there were no, there were, there were no jobs, but there was a chance to make money because [00:30:00] like there was a growing pool of startups and there was no one willing to invest in them.

Hussein Kanji: So let's go set up a venture fund. So then I found a couple of other people to, you know, that bought into the same idea. There were four of us and very few people know this. There are four of us who started it. We ended up partying ways with one of the, one of the four because he just wouldn't do any work.

Hussein Kanji: Like we used to hold meetings. We used to not turn up to meetings on time, but we used to, we used to have venture funds in general, tend to do Monday partnership meetings where they talk about all kinds of stuff, including like new companies, but also all this stuff inside of the company. And that's kind of the cadence of the firm.

Hussein Kanji: So we modeled ourselves like a, like a traditional venture fund. We started doing Monday meetings. They used to be held at one o'clock, like same time every week, like same place. We had a little office and he wouldn't turn up. He'd forget. It's like, how can you forget the same time? Like every single week, like, like, how can you forget?

Hussein Kanji: So I was like, we'll make this easy because you're busy doing other things. ‘Cause everyone is trying to pay their wages. Like, you know, you're trying to do other things. [00:31:00] Be scrappy while you're setting up this fun. So like we will come to your house and we will do the meetings at your house. And after like three or four times where we would like ring the doorbell, stand in the rain and he wasn't around.

Hussein Kanji: We're like, maybe this is like the wrong fit. So we ended up parting ways. And then our third partner left like abruptly and went off and set up another fund that competes with us and won't say the name because it's like competitive, but like, like literally quit on us to go form another fund. So then we're down to two.

Hussein Kanji: Uh, and that's the two who, who set up the fund, which is Hoxton. And then it took us like with all those bumps and the fact that most people that we spoke to, when you asked, when you explained what I just explained, right, why there should be a business case for Hoxton, like, which to me was like pretty obvious and really not that complex.

Hussein Kanji: Most Americans, like, including like institutions, did not believe that there was anything happening on the ground that you know, when you look in the rears. which is what most people do. And they say, like, you know, we, we believe this story in [00:32:00] the 80s and nothing really happened. We believe that in the 90s, nothing happened.

Hussein Kanji: We believe that in the dot com bubble, nothing happened. And now you're saying this time is different. We're not so sure this time is different. And you're like, okay, I get that. And then when you talk to Europeans and Brits, they're like, so basically you want us to give you money to gamble. And then you want to take a cut of the profits.

Hussein Kanji: Because you're thinking you make money by gambling, like, you're just going to blow all of our money, right? And you're going to pay yourself something. It's like, no, this is not gambling. This is like proper, like, early stage venture. It took us like 39 months to raise the fund. A very, very, very long time to raise the fund.

Amardeep Parmar: How were you able to convince Wu Pin that, what was the thing that actually got those first LPs on?

Hussein Kanji: The first LPs were all individuals who believed in us. So there were basically people from a past life in our careers who are willing to write us a check. And we're like, we believe in you guys versus like, you know, we, many of them actually like told us, we're not so sure about this like thesis.

Hussein Kanji: [00:33:00] Like, so we're going to write a check that's small enough for us, but like meaningful enough for you guys. But with the assumption that, you know, this check is probably going to go to zero. Like, you know, so we had like an early engineer at Google, like, you know, he's like first, first 20 hires or something like that, like very early and made a lot of money at Google.

Hussein Kanji: If you're, if you're a Google in the super early days, like you walked away with hundreds of millions of dollars. And that was like his intellectual framework was like, you know, this is probably a pretty, these are smart guys. They're probably doing something that is so absurd and so low probability.

Hussein Kanji: They're very likely to lose my money, but I'll write them a quarter million check because like a quarter million doesn't mean all that much to me. Like, but I'm not going to write like a million dollar check. Uh, and so this was like the intellectual thought process on those guys, but you can only round up so many of those checks.

Hussein Kanji: And the one piece of advice I got was don't optimize for the fun size, just optimize for getting going. So whatever you can raise is go with it and then go [00:34:00] do stuff. And then, you know, the rest will kind of follow. We were a little bit too institutional and too old fashioned about this. We're like, no, we have to raise this amount of money because we need this amount for reserves and this amount for follow ons.

Hussein Kanji: And like, you know, like all of this like structure now, because that's the way you do it inside of a big firm. And so we held out to try and raise this bigger, wasn't very big. It was a 25 million fund, a 25 million fund. And then a family got very excited year. And they were like, we believe in the future of tech.

Hussein Kanji: We find this really interesting. And they ended up writing us the first meaningful check. And then that catalyzed a couple of other people to then write checks. And then, then it all kind of came together and we were so terrified. So venture farms are benchmarked by the year that they were started. So it's in your best interest to start a fund in January.

Hussein Kanji: So you get the full calendar year behind you. You know, all of this kind of came together in September, October, by the time legals were done, it was like end of November. And so November 26th and our 10 year anniversaries like this, November 26th, she's not that far [00:35:00] away. And so we're here to think it's been 10 years, but you know, it's not, it's a month to get to January a month in like a couple of weeks to get to January.

Hussein Kanji: And we didn't want to chance it like when they're closing on November. So we get calibrated and benchmarked as a 2013 fund. Not having done any investing in 2013, which means every time you look at the league tables, et cetera, right? You know, everyone else, it's like, it's like being a kid. It was like, you know, the old, the youngest kid in the class.

Hussein Kanji: I get a disadvantage to everybody else. Um, but yeah, we were, we were terrified that if we waited. We would lose the money and so close it, start, get going. 

Amardeep Parmar: Obviously you close that first round and then since then you've gone on to raise further funds and you've invested in so many companies and one of your early investments was Deliveroo, right?

Amardeep Parmar: And when you get a company like that, that's obviously gone on to do so well and become a household name, it obviously helps the fund because people see like, Oh, they're good at picking. What made you invest in [00:36:00] Deliveroo and maybe  other people weren't?

Hussein Kanji: Yeah, and it's, it's, Deliveroo isn't even our best company.

Hussein Kanji: Like, I'm much more bullish on, on DarkTrace in many ways, which is our cybersecurity business, which we also took public like a month later. We had met Will through a friend of mine, who is a, another American, Asian, like Asian American, who'd come over and had gone to school with Will. And Will was in grad school at the time and thinking about setting up Deliveroo.

Hussein Kanji: And we went to lunch at Bread Street Kitchen. And I proceeded to tell him why this was like a dumb idea. I shouldn't do this, but he really wanted to do this. And like really bothered him. Like you couldn't get delivered food the way you could in New York, uh, in London. And so this is what he wanted to do with his career.

Hussein Kanji: He was a hedge fund guy before this. Um, and like before business school, uh, and he was probably would have gone back into the same hedge fund type route if, if it wasn't for deliveroo. Uh, and then he set it up in the summer. Like you graduate in the spring, you set it up in the summer. And he asked me if I'd be an angel.

Hussein Kanji: We weren't that liquid. We were, it was like 2013. We were trying to close our fund and there was no fund at that point. So [00:37:00] we said no. And then in January, February, and to be fair, we said no, but we also believe like, you know, like in full disclosure, like I didn't think this was going to go anywhere. Right.

Hussein Kanji: And it wasn't the only delivery company at the time. There were a few other delivery companies that had set up at the same time. I just thought that space was going to be incredibly difficult. And he launched, he launched in South Kensington, Chelsea as his first neighborhood. And he was growing something like 5 percent a week.

Hussein Kanji: And so it wasn't lots of data, but it was enough of a steer. We're like, you know what? I think I'm wrong. Like, I think there's actually something here. And then we spent a lot of cycles with him and then we ended up, we were terrified that this company would need a lot of money. And no one would write the check because there weren't that many venture funds here again.

Hussein Kanji: So we wanted to team up as early as possible with the U. S. fund because the only way to get capital into the economy here was, was to partner up with U. S. firms that were much bigger. And so we spent a lot of cycles with one particular U. S. firm and then they ended up getting to partnership. I think gave approval, but the,

Hussein Kanji: they told the person who was [00:38:00] like leading it, that's kind of your neck on the line. If it doesn't go anywhere, like you're, you're the young guy, you're, you want to do this deal in London. We'll support you. But if it goes sideways and that was like enough career risk and career risk is often the reasons why VCs don't take risk.

Hussein Kanji: It's weird. It's like they get it intellectually, but then they don't want to look like a fool among the partnership. And so he pulled out and then Index on that. I'm getting really excited. And then index basically caught us out, right? Like there's no reason to bring Hoxton into the cap table. If you're indexed, like you can, you can do and carry the load by yourself.

Hussein Kanji: And then we'll fought with, with index and goddess made sure that we got a slot and got a board seat. Like, cause we were a very old fashioned, like, you know, we roll up our sleeves and we take board seats. Like we weren't like passive and that was the journey. And then, yeah, you're right. Like, you as a venture firm in the early days, like what you do in the early days sets the tone for the firm.

Hussein Kanji: Because if that stuff turns out to be successful, then people think you have a knack for picking these things. And then people come and talk to you and it becomes really [00:39:00] virtuous. If you don't do that in the first three, four years of your fund, it is very hard to build that kind of momentum. We got very fortunate.

Hussein Kanji: I think we were also in the right place at the right time. This economy was really growing, and there's lots of things that we probably should have said yes to that. We didn't. Our biggest regret is not saying yes to you. I pass. We saw it like six months ahead of Excel. We were late in the fund. We didn't have very much money left in the funds.

Hussein Kanji: We couldn't really write the check. I stupidly turned down Monzo, which like, you know, I wasn't convinced. But I knew Tom had written a check to go cardless as an angel, and I should have just written the check. But, you know, there was, we make a bunch of mistakes, but if you get enough good ones, you look like a successful firm.

Hussein Kanji: If you look like a successful firm, success begets success. And that's hopefully what's happened. And the machinery is now kind of working. 

Amardeep Parmar: You mentioned dark trace there by being exciting. Could you tell people who maybe haven't heard of dark trace, like why dark trace is something you're so excited about?

Hussein Kanji: Yeah, it's a, it's a cybersecurity business. That's basically like an alarm system for your corporate network. And it [00:40:00] figures out. intelligently when to ring the alarm bell. And nowadays it actually does things like fix things in real time. You know, it did 545 million in revenue last year. Like it's a software business has real EBIT, uh, like has cashflow.

Hussein Kanji: Like, you know, it is a, it is a solid business. It is, I think, undervalued in the market because I think the London stock exchange was a whole another topic is not the right venue for these kinds of companies. But like, it's a, it's a found, like it's a real, like to go from zero, which is when we invested in 2015, it's like over 500 million in revenue, less than 10 years later is like, that's like really impressive.

Hussein Kanji: There are very few companies like in that category out of the UK or even in the US. 

Amardeep Parmar: So thanks so much for coming on today. There's so much more I could ask you. So I have to get you on again in the future. We're going to jump into a quick fire questions now. So there are three British Asians or Asians in Britain, because I know you don't like British Asian terminology that you want to spotlight that you think people should be paying attention to or listening.

Hussein Kanji: Yeah. I mean,  so I would say on the venture scene, the young up and coming person is, is Reese Chowdhury, who I [00:41:00] think has been, been on the pod before. Um, he runs a fund called concept ventures and like, he's starting to like, he's starting to get the imprint out there in terms of the seed stage community.

Hussein Kanji: Um, I think, uh, On the founder side there, there are quite a few founders who have actually done really well. But one of the serial founders, I think that's Eamon, now is a man who was a founder of Onfido and has been doing a bunch of stuff in terms of advising, but now also has his own company. You know, I think there's this whole generation of folks are kind of coming up through the ranks, you know, who are making and making an impact.

Hussein Kanji: And then, you know, he probably gets a lot of bad press and sometimes deservedly so, but like our prime minister is a pretty good, like a good young, like he's not that old, right? Like he's kind of closer to my age. Like, so he's in his like forties, like, and there's a bunch of, I mean, the UK, I think it's a tough, it's a tough thing to turn the ship.

Hussein Kanji: And I don't know how long this is going to last, but like, we've taken a leadership view on a lot of different stuff, like the summit in November is I'm like really curious to see what what [00:42:00] happens. And he's not a techie, but is around the techie industry. So like, that's a that's a that's another one.

Hussein Kanji: I'm curious. I suspect there's gonna be a change in government. I'm gonna be curious to see what he does post government. 

Amardeep Parmar: Yeah, that'd be really interesting to see. And the next question is, if people listening right now want to learn more about your story or about what Hoxton Ventures are doing, where can they go to?

Hussein Kanji: Probably  just the Hoxton website. Um, and if you Google me, you'll find a bunch of stuff, uh, in terms like, like, like other pods or videos, et cetera. But a lot of this stuff is on, on the Hoxton website. So hoxton.vc. 

Amardeep Parmar: Is there anything that you or Hoxton is looking for help with at the moment that people can reach out to in the audience?

Hussein Kanji: Uh, we are hiring. Uh, it's no great secret. Uh, so we're trying. To build up the firm a little bit more. We're a partner only organization. So I think the hard part for us is like finding people. We probably take chances on the people who are in between, like, like where I was, because like, sometimes those people grow up to be great partners.

Hussein Kanji: We don't do like younger employees and then that sense of, but it's because it's a partnership culture and we're, we're actively looking, uh, and like, we want [00:43:00] more diversity in the firm. 

Hussein Kanji: Perfect. So thanks so much again for coming on. Any final words for the  audience? 

Hussein Kanji: Uh, no, I'm glad, I'm glad to be on. So, uh, thank you for inviting me.

Amardeep Parmar: Hello, hello, everyone. Thank you so much for listening. It means a huge amount to us. And we don't think you realize how important you are because if you subscribe to our YouTube channel, if you leave us a five star review, it makes a world of difference. And if you believe in what we're trying to do here to inspire, connect and guide the next generation of British Asians, if you do those things, you can help us achieve that mission and you can help us make a bigger impact.

Amardeep Parmar: And by doing that, it means we can get bigger guests, we can host more events, we can do more for the community. So you can play a huge part. So thank you so much for supporting us.

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