The shift to Ethical Investing
Spencer Crawley, Co-Founder and General Partner at firstminute.Capital talks to RAOGlobal about the impact of Brexit on the investment market, in particular the UK tech sector;
Q. How has the investment climate been shifting as a result of Brexit? In particular the level of EU venture funding
A. Initially many feared that the Brexit vote would cause a slowdown in funding to emerging British companies, but so far that hasn’t been the case.
The volume of deals and the aggregate quantum raised has increased since the Brexit vote, at more than $1 billion per quarter post-Brexit. This is unsurprising, perhaps, given the global context of venture capital setting new post-dot.com records in terms of dollars invested in Q2 2018. As context, research from London & Partners showed that the UK has received more funding than any other European tech hub in the two years since the Brexit vote.
At firstminute.Capital, we’re balancing our excitement over the momentum in the UK tech ecosystem with staying true to our desire to back the best entrepreneurs wherever we find them. We have backed founders across San Francisco, New York, Tel Aviv, Berlin, Paris, Warsaw, Porto, Cambridge (UK) and Nairobi, as well as many in our own backyard in London.
Specifically in regards to EU venture funding, what we have seen is the European Investment Bank (EIB) pulling back on deals with UK venture capital and private equity groups. Reportedly, only 8% of the EIB’s private equity investments were in the UK last year, compared with 27 percent the year before.
All in all, we don’t think there has been a better time to be an investor in the UK, but the Brexit overhang remains. We hope more will be done to try to minimize the many unknowns – for the sake of founders and investors alike.
Q. What are the likely consequences for the UK tech sector once it leaves the EU Digital Single Market?
A. The most important factor for a startup ecosystem to flourish is access to bright minds and engineering talent. A hard Brexit could both reduce draw the UK has in attracting the top technical talent and in parallel make it harder for those startups in London and elsewhere to hire the people who do still very much want to work in the UK. The fall in the pound have also raised overheads for startups importing services and products, making it tempting for them to move operations abroad, though this trends has not yet taken materialized in any meaningful scale.
Q. As London tech start-ups have a large international workforce how will the market continue to attract the best talent post Brexit?
A. It is worth nonetheless revisiting the for factors that have made the UK the dominant tech sector in Europe: (1) the strength of its universities, particularly in computer science across Oxbridge, UCL, Imperial, Edinburgh, Bristol and Manchester;
(2) the abundance of angel money coming out of the financial services, with professionals taking advantage of UK government tax schemes that encourage investment into early stage business; (3) success stories such as ARM, Skype and lastminute.com breeding a dynamic whereby not only do these figurehead founders become venture investors themselves (Amadeus, Atomico and firstminute respectively), but many businesses are spun out of these success stories too as employees found their own start-ups; (4) despite some high-profile bank moves recently, London remains home to the global headquarters of many behemoth corporates operating across a range of sectors, many of them making increasing numbers of tech acquisitions.
Paris, Berlin and other cities will compete vocally with London in the coming years. However the above four factors will not change post Brexit, so provided the UK can adopt sensible skilled immigration policies that caters for the smartest entrepreneurial and engineering talent wanting to enter the country, there is much to be bullish about.
In the meantime, the UK tech community continues to be outspoken about what will breed their next global British tech success stories: continued excellence in our universities, the ability to bring in international talent, access to capital, and a pride in maintaining the diversity that its major cities has proudly fostered.
Spencer Crawley will be speaking at RAOGlobal on Oct 8th at Church House, Westminster. Tickets can be booked here.