Brexit leaves London tech community ‘shell shocked’
The UK vote to leave the EU has thrown London’s future as a hub for tech start-ups into question, and left entrepreneurs and investors worried about the long-term access to talent and the single European market.
The country is home to more than 40 per cent of Europe’s start-ups valued at $1bn or more, and fostering technology and innovation has been a key platform of Prime Minister David Cameron, who announced his resignation on Friday.
The tech community had been strongly in favour of remain, according to polls before the referendum, with several start-ups saying that they would quit London in the wake of a vote to leave.
Brent Hoberman, co-founder of Lastminute.com and a leading investor, said that the tech community was “shell-shocked” following the result. The vote creates a “brand issue” for tech in the UK capital, he added.
“What we are seeing in London now at the school gates and the office, there is a shell-shocked international community saying, ‘Is this really what our country believes, looking backwards rather than forwards?,” he said. “And technology is the most forward-looking industry we’ve got.”
Many entrepreneurs and investors said they were concerned about attracting talent to London, where many software engineers are non-UK citizens.
Fred Destin, partner at venture capital firm Accel, whose investments include food delivery company Deliveroo, said his main worry was the ability of companies to recruit talent. The “fluidity, speed and simplicity” of finding people from across the EU was a big advantage. He added that the leave campaign’s proposal to introduce an Australian-style points system was too laborious and slow for small companies.
Meanwhile companies are struggling to plan because of the uncertainty created by the decision to leave the EU, which will take several years to be formally enacted.
Taavet Hinrikus, chief executive of TransferWise, a London-based money transfer company valued at $1bn last year, said earlier this week that a leave vote would be a “disaster” and the company would consider leaving the city.
After the vote, the company was more cautious but said leaving remained a possibility: “Chances are we won’t grow the team [in London] and we might look at headquartering elsewhere, but we won’t know for quite a while.”
Nelson Sivalingam, founder of Wonderush, a marketplace for classes and activities, added that the vote would have a big impact on start-ups’ ability to expand on the continent. “A big pull before was the single market and the ability to scale very quickly across Europe, and now we can’t do that,” he said. “We don’t have a domestic market big enough to build a $1bn company.”
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Raising money could also be affected by the fluctuation of the pound, which plummeted as the results of the referendum became clear. “Currency movement certainly impacts valuation of UK companies and investment costs,” said Simon Calver, partner at BGF Ventures, a UK-focused tech investment fund. “But on balance we still have great infrastructure.”
Mr Calver’s remarks echoed the comments of other leading tech investors.
“I’m optimistic that we can make lemonade,” said Saul Klein, a partner at LocalGlobe, a London-focused venture capital fund. “The entrepreneurial community rises to the occasion, and is very, very strong at this point.”
Some start-ups also saw potential advantages to leaving. Christian Faes, chief executive of LendInvest, a peer-to-peer mortgage lender, pointed to more friendly regulations.
“Europe is a big bureaucracy and some of the laws and directives you see coming out of Europe do seem like nonsense, and we will not be burdened by that in future,” he said. Most of LendInvest’s investors and all of its lenders are UK based, helping shield the company from currency fluctuations.
Others saw potential openings for fintech start-ups at a time when British banks are reeling from the Leave vote. “Leaving the EU may discombobulate big banking conglomerates and fintech businesses will look to fill any spaces,” said Rhydian Lewis, chief executive of RateSetter.
However, an exit from the EU would also make it much more difficult for those companies to access the European market. The current system allows for regulatory “passporting”, in which a financial services company regulated by the UK can operate in Europe without additional licenses. Companies like TransferWise rely on this for much of their business.
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