Old Street roundabout in London at the heart of the city's tech sector. Uncertainty on the status of the EIF is being felt across the tech community © Bloomberg

Venture capital investment in European start-ups dropped by over a third in the second quarter, contributing to anxiety about the continent’s technology sector that is expected to be buffeted by Britain’s exit from the EU.

In Europe, funding from venture capitalists fell from $4.3bn in the second quarter of 2015 to $2.8bn in the three months that ended last week, according to preliminary data provided by research firm Pitchbook.

The fall in VC funding comes as technology executives in London worry whether the Brexit vote could jeopardise the UK capital’s future as a start-up hub for the continent. London is home to more than four in ten of Europe’s start-ups valued at $1bn or more.

Suranga Chandratillake, a partner at UK VC firm Balderton Capital, said funding had not been hit in the second quarter in anticipation of the UK voting to leave the EU. In the longer term, he believes the European technology industry will be robust — but start-ups may leave London, especially if the UK blocks immigration from the EU.

“It [Brexit] is going to have some impact. There are big questions about access to capital . . . the uncertain political climate. and there’s the talent question when it is all eventually figured out if there are more severe limitations on movement,” he said.

Globally, fears that start-up funding could dry up as the technology boom stalls appeared unwarranted as VCs invested $40bn during the quarter, up 20 per cent on the same quarter last year.

But the total is skewed by large rounds for companies avoiding the public markets such as Uber’s $3.5bn investment from Saudi Arabia’s sovereign wealth fund and its Chinese rival Didi Chuxing’s $4.5bn from investors including Apple.

The UK was by far the most popular European destination for VC funds in the quarter, with $994m of the $2.8bn funding start-ups headquartered in the country, according to Pitchbook. This fell far less than the total, down 5 per cent.

The number of companies receiving VC investments fell 47 per cent across all regions, as VC firms concentrated their bets, giving on average more money to each company they fund.

Fergal Mullen, co-founder and partner of Highland Capital Europe, a VC firm with offices in London and Geneva, said many US venture capital firms pulled out of doing larger VC deals in Europe after worries about the market in Silicon Valley late last year.

“It is definitely less hot than it was this time last year. But it is not full-on cool,” he said.

Venture capital invested in European companies at later stage rounds fell from $2.8bn in the second quarter of 2015 to $1.2bn in the quarter just ended. Earlier stage venture capital ticked up slightly, with growth in the earliest stage of all — angel or seed funding — increasing from $351m to $398m.

Across the world, Pitchbook data showed a significant fall in the amount invested in angel or seed rounds, halving from $4bn to $2bn in the second quarter year-on-year, but a rise in early and late stage capital.

In the US, total venture capital funding stayed level at $21bn, supported by growth in later stage VC from $11.2bn to $13.9bn, while early stage, angel and seed funding fell.

Theresia Gouw, a partner at Aspect Ventures in San Francisco, said early stage start-ups are reverting to the previous norm. “We’ve started to see seed become a little bit more like seed, like not $5m, more like $1m to $2m.”

Valuations are often 20 or 30 per cent lower than they were last year, she said. “Qualitatively, we’ve certainly seen valuations go down across all stages.”

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