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Brexit: Mixed messages from startup investors

Post-Brexit uncertainty, new challenges and a tougher economic outlook appears to have made investors cautious.

26 Jul 2016

Perhaps mindful of the damaging impact that negative sentiment could have on confidence in the capital, the big London- based venture capital firms were unified in projecting a message of calm.

However, businesses that Courier spoke to all said there was a degree of nervousness from investors in the days immediately after June 24. Some reconsidered pending investments, others pulled the plug altogether. Some have been accused of opportunism. One VC said: ‘We know of a couple of examples where VCs changed the terms at the eleventh hour, blaming Brexit. It’s outrageous.’

Uncertainty around the health of the economy and political negotiations over the free movement of EU workers are the big questions for investors sizing up British firms. Any business that needs a lot of talented people to scale is under extra scrutiny.

Startups raising investment are being advised to raise much more than they had planned in anticipation that future funding rounds will be trickier.

Brexit comes as European VC funding shrunk to £1.8bn between April and June this year; a 34 per cent drop compared to the same period in 2015.

What the startups – and the investors – say

‘Due to the uncertainty and potentially more restrictive immigration in the UK, Danish and Nordic companies may go directly and earlier to the US, rather than try to build a position in the UK.’ Gregers Kronberg, Northzone

‘If there’s more growth on the continent [compared to the UK] we will follow that with increasing our own time commitments to Stockholm, Lisbon, Berlin.’ Rob Kniaz, Hoxton Ventures

‘Each market has its own set of challenges, but successful startups are so nimble they can actually thrive in uncertainty and adversity, so we’re confident they’ll work things out.’ Martin Mignot, Index Ventures

‘Uncertainty in the capital markets is giving investors pause for thought while they wait to see how things play out, which may further exacerbate the challenge of raising Series A capital.’ Hamish Grierson, Thriva

‘Brexit is a slap in the face for this new, exciting era of technology that we have all witnessed develop in Europe. But we are confident that talented entrepreneurs and the technology ecosystem at large will rise above this setback. Removing the UK from the EU is akin to a football team removing their best players in the middle of a cup final. It is an unthinkable error.’ Spokesperson, Balderton Capital

‘Whatever happens in the currency and stock markets, we need to take a long-term view. London has been one of the most important cities in the world for hundreds of years. That’s not going to change now.’ Saul Klein, LocalGlobe

This story is part of a special report on Brexit’s impact on startups – covering fintech, currency, investment, talent, regulation and funding – featured in Courier Aug/Sept.