A couple of weeks ago, word got out that Rob Kniaz, who co-founded European early-stage investment firm Hoxton Ventures in 2013, was on the verge of establishing a new VC fund focused on deep tech bets.
Tech.eu has now learned more details about the new fund, and who Kniaz will start building it with.
After spending the last decade operating Hoxton Ventures, which has backed the likes of Deliveroo, Darktrace, Babylon Health and FabricNano, Kniaz is teaming up with Vanela Bushi to build a new fund that will operate on the intersection of deep tech and biotech in Europe.
Dubbed H Tree Capital (based on a term from the field of fractal geometry, which this writer is keen to stay far away from), the new fund will be based out of London, where Kniaz has been building - and Bushi has been advising - Hoxton Ventures.
In fact, the pair will use Hoxton Ventures' office (and back office) for a while, as Kniaz is only officially phasing out from the investment firm he started with Hussein Kanji when the firm's next fund rolls around. The investment announced its third fund, to the tune of $215 million, a little over a year ago.
I touched base with Kanji, who set up Hoxton with Kniaz in 2013, about his thoughts on H Tree.
"We continue to work with Rob to support the companies he has invested in during his tenure at Hoxton, and look forward to seeing him develop his new specialized fund H-Tree."
H Tree Capital was brought to life because Kniaz and Bushi identified a gap in funding options in a space that they feel will grow rapidly in the coming years: the junction between deep (health) tech and bio.
Or, in other words, where computation is becoming increasingly important when applied to crucial life sciences problems in areas like drug discovery, clinical trials, synthetic biology etc.
In a conversation with Tech.eu, Kniaz posited that the intersection of deep tech and bio is almost exactly where European tech in general was a decade ago when he co-founded Hoxton. That includes a lack of institutional investors in the ecosystem who are ready to make significant bets on innovators that have turned the field into their new playground.
That those change-makers can indeed hail from this part of the world is an assumption based on data: Europe produces more scientific publications than China and the US, and there's massive talent going into science degrees.
I caught up with Jack O'Meara, co-founder and CEO of Ochre Bio (also part of Hoxton's portfolio), who echoed the sentiment:
"Europe is home to a lot of exciting scientific innovation, but a dearth of capital and entrepreneurial ambition has limited the continent's prospects. The latter is now changing, as talent is being recycled into the ecosystem from winners like Exscientia, Kymab, GW and turbulence at large pharma."
"More of the former will help to catalyse the sector, and the complementarity of the Rob-Vanela duo are ideally positioned to help lead it towards impacting health globally," O'Meara added.
So why couldn't Hoxton simply step into the perceived funding gap, particularly because the firm has made a number of investments in the space in the past (e.g. Pear Bio and Peptone) and will continue to do so in the future?
Kniaz says there's a strong likelihood that H Tree and Hoxton Ventures will become co-investors in certain companies in the future, but argues that the sheer size and specificities of the 'deep biotech' opportunity ahead calls for an independent fund, with a dedicated strategy, a specialist mindset and a tailored operating model and approach to investing.
It's also the chief reason why he has partnered with Bushi, who worked in venture capital in the past but has spent most of her career building up experience in the field of healthcare.
Bushi tells us that we're at the starting line of a 'super trend' globally, with 'deep biotech' playing a crucial role when it comes to ageing populations, spiralling healthcare costs, new and exciting treatments such as genomics and personalised care, AI technology advancements and more.
"This industry needs deep understanding of both technology and its applications, but that needs to be coupled with underlying experience, knowledge and networks in the bio space. This requires an interdisciplinary approach that brings technology, science, healthcare systems and delivery knowledge together. Of course, there is a lot of talk about an interdisciplinary approach to all this, but when you look at our current VC ecosystem, we are still hanging onto legacy set-ups. You need to speak the language, talk the talk and have walked the walk in some these spaces to truly realise the value and gain traction. And this is what we bring to the party," Bushi says.
The fund will have a dual strategy of backing risky innovations early on, but also double down on companies that graduate from the pre-seed stage with lots of potential for upside.
Also worth noting: Kniaz and Bushi will spend part of their time making sure founders are aware of the opportunities in the American market. Both were raised and lived and studied in North America, and posit that the US will be the largest customer market for the majority of companies it ends up backing and working with.
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