Hussein Kanji is the founder of Hoxton Ventures, a conviction-driven early stage investor in Europe based in London.

What’s new with Hoxton? What are the highlights of this year?

Nvidia selected us as one of five venture firms they want to work with in Europe.

Cusp raised a $100 million oversubscribed round, just a little after a year after we led the pre-seed at the sheet of paper stage.

We funded two new exciting deep tech businesses – one with ties to Oxford that can synthetically replicate critical earth minerals, and an exciting robotics learning company out of Imperial. A bunch more companies raised a ton of money (or got acquired) – news to all unveil in the next couple of months.

We are also preparing for a possible fourth IPO, which will hopefully happen in the next 18-24 months, with Preply. They’ve grown into the largest language marketplace in the world.

And Time Magazine named ROLI’s Piano System “Best Invention of the Year” which is pretty cool if you’re a product design enthusiast like me.

You have moved from the US to start shop in Europe more than ten years ago. Are you still long on Europe – why or why not?

100%. It’s never been a better time to be bullish on Europe.

The flywheel is working. There’s more talent, more experience, and more money than ever to scale. There’s no ambiguity in my mind that we can produce $1-10B+ companies. The only question now is can we (repeatedly) create $100B+ companies.

The only drawback in Europe is it’s harder to be a VC. Investments are up tenfold from when we started and the level of competition is at an all-time high. More firms are interested in funding high quality European startups. Healthy markets should be competitive. But it means you need to bring your A-game to the arena.

The only good news (for us) is there’s a growing set of VCs who don’t believe trade makes you wealthy. It’s disguised under the rhetoric of European dynamism and is more of an insecurity about the scale of the American tech industry. Why does America have all the nice things? It isn’t fair.

The problem with this logic is it’s boneheaded. Trade isn’t zero sum. It makes both sides of the pond richer. The path to success in Europe lies through the US; build here, scale there. That is clear from all the data too. My partner Payton spelled it out here.

40% of European Series B rounds are led by US funds – is this a net positive or a structural risk for the European ecosystem? What’s still holding back local late-stage capital formation?

Neither positive nor negative. The world has changed. The Americans have woken up to the European tech opportunity.

My suspicion is that over the next decade, what happened in London’s capital markets, will happen to the European venture market. The industry will skew towards US firms – and almost certainly dominated by American firms at later stage rounds. Those funds are simply equipped with more capital and resources. Getting them involved in European businesses gives entrepreneurs the best possibility of achieving global scale. Our job as early stage VCs isn’t about making Europe great again; it’s about building the biggest companies in the world and generating the largest outcomes for our founders and LPs. That means we will encourage their participation.

If I was an incumbent European venture firm at the Series A/B/C stage, I’d be thinking long and hard about how to compete effectively in this shift.

Given the current market fragmentation between boutique and supermarket VCs – what operational changes (beyond just fund size) are key for a VC firm to build institutional durability and attract top tier LPs?

Operational changes? Deepen your bench.

This is an industry with one simple goal: generate outsized returns. We are all familiar with the power law economics of our industry. Only a handful of companies account for our industry’s overall returns.

That means do what it takes to pick the right long-term winners, make sure they get well capitalized, and build the durability to get them to $1B+ in revenue.

What does it take to do that? The right handful of talented, connected and well-trained investors.

These days it feels like more firms focus on world-class marketing and Linkedin posts. I’d like to believe the best LPs see through it all.

You’re quite active in helping European startups expand into the US market. Do you follow a playbook or approach each case differently? And what’s the single most common mistake you see European founders make when entering the US market?

If venture was a formula, I would outsource my work to an LLM.

There’s no prescriptive playbook. But we all know, even though history doesn’t repeat, it rhymes. There’s a lot of accumulated wisdom at Hoxton on what has worked in the past, and what might need to be tweaked in the future. And where pitfalls may lie. We’ve been told we’re good at giving useful advice in these moments.

The single biggest mistake is not taking the US market seriously early on and not willing to move a founder across the pond to tackle it.

We’re beyond the first-order AI wave. What’s the most significant second-order effect of the AI boom that you think European VCs are underestimating or mispricing right now?

The important businesses of the internet era were Alibaba, Amazon, Booking, Google and Salesforce.

There is no way anyone would have bet that these were the ones to bet on, and everything else was noise. Two of them didn’t even exist until the tail end of the boom.

Amazon was founded in July 1994. As context, NCSA Mosaic (the first browser) was released in November 1993. Netscape didn’t even issue its first press release until October, 1994. Booking was founded a bit later, in November 1996.

Google was founded in September 1998 and raised its first venture round in the summer of 1999. Alibaba was also late and started in April 1999. Salesforce started even later, in February 1999. The bubble burst in March 2000.

In that 1994-2000 period, a lot got funded. The smart money would have said eBay, Excite, Monster, Netscape, Priceline, Yahoo, etc were going to be the big winners of the internet. All underdelivered.

Then there were the duds. People remember Pets dot com and Webvan as big sinkholes of cash. They forget how much money went into C|Net, E*trade, Infospace, iVillage, Kozmo, Shockwave, Ventro, etc. Even then, if you were early and able to exit, you’d be surprised at how much money was made.

I’m convinced the same thing is going to play out in this new AI era. I’m also certain that none of us really know who the handful of truly big winners is going to be, and where the most value will be captured (and retained).

Bear in mind, back in 1995, Netscape was supposed to win as the browser of record. Then Microsoft sprinted and Internet Explorer in the summer of 1995. The browser market never came back. Meanwhile, Amazon was dismissed as a niche online retailer of books. No one would have ever guessed that it would have built Loudcloud, and created the cashcow that is now AWS.

That’s why we spend a lot of cycles thinking about where value is going to be created, and more importantly, retained. It’s not always pure software or infrastructure that might have its Internet Explorer moment. Sometimes it’s about what can be built (durably) with the $400 billion of annual spend on AI models. We’ve been early behind some of these spaces, from AI drug discovery (Peptone) to material science (Cusp) to services layers over AI (Avantia Law, Cogna, XYZ Reality).

What’s a market category you expect it to emerge in the next 12-18 months and what is one sector you see as oversaturated?

If I knew the answer to that, I’d be a lot wealthier. I can’t predict the future. I can only fund the companies who want to make a dent in it.

Oversaturation is easy. Find out where the dumb money is plowing in and creating tons of replica companies, e.g. scooter companies, Amazon roll-ups, quick commerce, etc. In AI, that’s harder because it sometimes takes a LOT of money which keeps out the dumb money.

What are some interesting companies or founders you’ve come across this week?

If they were interesting, we would have issued them a term sheet and they will appear in our newsletter six months from now when (or if) they announce.

What’s a surprising insight you’ve taken away from a conversation this week?

Palantir is heralded today as a great hiring machine. The truth is only 5% of its managers there could hire well. They centralized hiring into a small pool of hiring managers, who then referred the qualified candidates to teams.