With Theresa May having announced that Article 50 will be triggered no later than the end of March 2017, spectators continue to wait with bated breath for any signs indicating whether it will be a ‘soft’ or a ‘hard’ Brexit. These include entrepreneurs, who despite flexibility in early start-up stages, may suffer from the resulting uncertainty, reductions in funding, restricted movement of EU nationals and loss of passporting rights.
The main concrete effect of Brexit has been to spread wide uncertainty of the future of London as Europe’s main entrepreneurial hub. Critical advantages of starting in London, such as access to financing and innovative regulations by the FCA (especially for Fintech start-ups), have been put into question. Some start-ups have reported withdrawals of funding offers, while FCA licenses may no longer be valid in Europe if UK firms lose passporting rights. Additionally, the main concern seems to be potentially limited ability to hire international talent if the UK tightens immigration laws. As Taavet Hinrikus of London-based Transferwise told the Financial Times, with half of the company’s 100 staff not having UK passports, such uncertainty requires extensive contingency planning.
Nevertheless, with uncertainty comes opportunity, especially in an industry based on innovative and disruptive technologies. Until the terms of the UK’s exit from the EU become more clear, it seems as though founders and investors alike feel that London will continue to dominate as Europe’s biggest start-up centre. This is reflected in the fact that venture capital funding in London was actually up to £518m two months after the EU referendum, from £475m in the same period last year. Additionally, the first half of 2016 saw €2.2 billion of VC investment in the UK, versus€1.05bn in Sweden, €0.96bn in Germany and €0.95bn in France.
However, other European cities are stepping up their game to entice start-ups. Berlin, despite only attracting €520m in VC deals in the first half of 2016, compared to €1.3bn in London or €1bn in Stockholm, is emphasising its cheapness and lower start-up costs. Additionally, authorities are not only providing financial support, but also decreasing bureaucracy (such as for visas and work permits) to facilitate international hires. The unsaturated nature of the start-up industry itself can be a draw, with Raashi Khanduri of Lytbulb saying that Berlin is a “black canvas with massive potential”, especially for disruptive technologies. The same qualities could increasingly make cities like Dublin, or countries like Lithuania, equally appealing. As countries and cities are vying for a share in the ever-increasingly valuable start-up industry, changes seem to be developing quickly and so everything could look a whole lot different again by March 2019.
It's been an incredible start of the year. With a new team onboard and new perspectives in mind, we are ready to make your experience at LSE as innovative as possible.
We are focusing all our strengths to bring you the most successful entrepreneurs, VCs and industry leaders on campus, as well as allow you to visit their office. Add to this two major conferences, with a new one on the boiling AI topic, and an intensive accelerator program to kickstart your project.
Hope you'll enjoy the ride, the LSE SU Entrepreneurs team.