Almost no one in the UK tech ecosystem wanted Brexit. Most of us are worried about the impact on our country and the continent – but one group that’s well positioned to thrive is the UK’s startups.
I’ve spent much of the last few days talking to Entrepreneur First’s portfolio and there are three main questions that our founders raise: access to talent, access to capital and macroeconomic factors. For all three, there are real issues to consider, but startups in the UK can face them with confidence.
Let’s take each of these in turn:
1. Access to talent
First, it’s worth making an obvious but important point: Britain has not yet left the EU and will not yet for some time – likely not until October 2018 at the earliest. There’s no overnight change in Britain’s laws or relationship with Europe. EU citizens still have the right to live, work and start businesses in the UK.
Even when we do leave, it’s quite likely that we’ll remain in the European Economic Area (EEA), which will leave much of the status quo for business unchanged.
Moreover, the EU is not the tech sector’s only source of international talent. We have one of the world’s best entrepreneur visas and an “Exceptional Talent” visa specifically targeted at the tech sector. Between them, they’re so effective that Entrepreneur First backed as many founders from outside the EU last year as we did people from the non-UK EU.
Arguing for continued access to top-tier EU talent must be a priority for the tech sector as exit negotiations begin, but we shouldn’t overstate the threat. In fact, the most important thing is that we don’t turn make concerns about talent a self-fulfilling prophecy: we can, should and will shout from the rooftops that we welcome the world’s most talented individuals with open arms.
2. Access to capital
We’ve heard some stories of investors getting cold feet since Thursday, but having checked in with our portfolio and network the vast majority of planned deals are going ahead as normal.
That’s unsurprising; the message from investors is that the UK VC industry is open for business as usual. Many of London’s most prominent VCs have quickly issued strong statements that they will continue to invest as normal (Index, Balderton, Atomico, LocalGlobe, Hoxton, White Star, Entrepreneur First, Seedcamp, among others).
UK VC funds have historically high reserves of “dry powder” and worriers should be heartened too that the European Investment Fund says there will be no immediate change in its activities in the UK.
It is too soon to assess the impact on angel investment, but there are reasons for optimism, in particular that a weaker pound and a search for uncorrelated assets may make early stage UK companies an attractive asset class for US investors (two well-known US angels emailed me to this effect over the weekend). And, of course, for local investors SEIS and EIS remain the world’s most generous tax breaks for early stage investment.
3. Macroeconomic impact
The macroeconomic impact of Brexit will be real and unpleasant – but startups have the least to fear. As this excellent Mattermark piece argues persuasively, if you’re betting on long-term technological change, short-term GDP isn’t what you should worry about. Some of the world’s most successful technology companies – from Microsoft to Uber – were founded in recessions.
The UK ecosystem has risen to prominence in recent years in part because our startups increasingly are pursuing world-leading innovation from day one. UK success stories like DeepMind, Swiftkey and Magic Pony Technology aren’t bets on local economic demand; they’re bets on the industry-changing impact of fundamental technology. At Entrepreneur First, our investment thesis is that emerging technologies provide an unprecedented opportunity for the most ambitious individuals to achieve extraordinary outcomes. Brexit doesn’t change that.
There’s no room for complacency and the tech sector in the UK would be foolish to ignore the broader impact of last week’s vote. Brexit is a tragedy for the UK and, worst of all, the least well off are likely to suffer the most. But whatever our personal feelings on the politics, the UK’s tech ecosystem is in a strong place. Everyone I’ve spoken to over the last few days is committed to making sure the UK remains one of the best places in the world to start a company – and Brexit doesn’t and needn’t dent our optimism.