On September 15, 2008, the day that Lehman Brothers collapsed into bankruptcy, Seedcamp, a London-based incubator programme for early stage European start-ups, was beginning its annual gathering at University College London’s Bloomsbury campus.
While political and business leaders struggled to calm the markets, and news bulletins screened footage of redundant bankers carrying boxes of personal items from their former workplaces, the buzz among the entrepreneurs snacking on pastries and drinking coffee at Seedcamp’s opening session made it seem as if they were oblivious to the to the tumult affecting markets outside.
For the start-up founders, however, this was not so much a crisis as an opportunity to be the next winners by reinventing the way people borrow, save and invest.
Among those at Seedcamp that week was Brent Hoberman, co-founder of one of the UK’s first big internet hits, the online travel and gift business Lastminute.com, and Founders Forum, a private network for technology entrepreneurs.
Mr Hoberman was also in London on June 24, the day after the EU referendum vote, to witness another day of political and economic upheaval. Having been among the many tech entrepreneurs to publicly back the Remain campaign, he is still struggling to see an upside for the UK’s tech start-up community from this day of crisis.
“Most people in our community think what we will get is Brexit light,” he says, adding that this is his most optimistic prediction of how events will unfold for founders. “We will still be able to get skilled migrants but we won’t get full access to the single market.”
Before the EU referendum vote it was hard to find a tech entrepreneur operating in the UK who did not think Brexit would be a disaster with many threatening to move operations overseas if the Leave vote won.
After the initial shock of the result, however, many are trying to see the positives, even if that often stretches their own natural optimism.
All the founders and investors interviewed for this piece felt that London would retain its crown as Europe’s biggest centre for start-ups. However, they all also added that the gap was almost certain to narrow between London and other European entrepreneurship hubs.
The biggest problem of the vote for Brexit is the one that affects all businesses, the uncertainty it creates. Taavet Hinrikus, the Estonian-born founder of London-based online currency exchange TransferWise, insists he will remain in the UK for at least the next four or five years, when he believes it will be clear what effect Brexit has had on the ease with which tech entrepreneurs like him can operate.
“Entrepreneurs are optimists by nature, so we’re hoping to make it work,” he says. “You have got to have an ecosystem in a city, and yes, I think that’s still where London probably wins the day. At the same time, we are making our contingency plans and we’re looking at where do we get regulated in Europe.”
His biggest concerns are finding a location whose financial services rules will still be applicable in other EU nations after Brexit and being able to hire the best talent from around the world easily.
Mr Hinrikus is concerned about the pro-Brexit camp’s wish to restrict free movement of EU nationals, noting that half his 100 staff in London do not hold UK passports. But he also sees an opportunity for the UK to improve its regulatory environment.
“The UK has the best regulatory regime, now. But possibly without European restrictions, it could be improved even more,” he says.
Another concern cited by many London-based tech founders is access to funding. Some admitted off the record that funding offers were pulled in the days after the Brexit victory was announced.
However, total VC funding in the two months after the EU vote was, if anything, a little up on the same period a year earlier. Figures from private equity tracker PitchBook show VC funding was £518m in the two months after the EU referendum vote, up from £475m in the same period a year earlier.
Farmdrop is an online grocery-delivery business founded four years ago by former City banker Ben Pugh to supply fresh food direct from the fields and bakeries of the producers to its customers. Although Mr Pugh admits the day after the referendum vote was “pretty sad all round”, not least because of his worrying for the futures of his Austrian-born wife and Berlin-based brother, he has been able to find potential silver linings, such as the possibility of increased demand for homegrown food.
“We were doing fine as part of the EU,” Mr Pugh says. “But if cross-border movement of food becomes more difficult, then the relative appeal of buying locally increases.”
Sales at Farmdrop were up 25 per cent year on year in the 10 weeks after the referendum result, he adds.
Brexit could also mean the creation of a better farming subsidy system than the EU’s Common Agricultural Policy, which has been a direct benefit to the small-scale farms supplying Farmdrop. “There were a few guys among our suppliers who were pro-Brexit for that reason,” Mr Pugh says.
He also feels secure about funding opportunities, having raised £3m in a round led by tech investor Atomico earlier in the year, meaning that he is now being called by other funds to talk about future financing.
“We believe we have cracked the code in terms of R&D so now we are in growth mode,” he says. “Brexit just takes the wind out of your sails a bit.”