Skip to content

Brexit ’caused over 40% fall’ in UK VC investment in Q2 2016

research

UK venture capital investment fell more than 40% from Q1 2016 partly as a result of Brexit.

According to CB Insights and KPMG Venture Pulse report Q2 2016, uncertainty around the Brexit referendum contributed to the decline in VC investment over the quarter.

Many investors, the report adds, refrained from making investments, instead taking a ‘wait and see’ approach until after the referendum.

“The outcome of the UK’s referendum to leave the European Union has introduced new uncertainties into the VC market ones that could linger in the quarters and years ahead. With no defined plan in place as of yet for an exit, however, most investors recognize that knee jerk reactions post Brexit are not the right solution.

“While it is too early to predict Brexit’s impact on talent acquisition and other key business activities, it is expected that concerns may cause investors to seriously scrutinize UK-based investments. In the interim, the uncertainties may create opportunities for other startup hubs to attract additional VC investment and interest.

“Cities like Barcelona, Berlin,Dublin and Paris may be able to attract attention, especially in FinTech, where the UK’s relatively friendly and accommodating regulatory environment up to now makes it the one of the most attractive place to base EU focused FinTech activities,” says the report.

Although uncertainty was felt throughout the market as a result of the Brexit referendum, the report notes that the UK did see some substantial late-state deals.

Many of these, the report says, took place across financial services (Transferwise or LendInvest), life sciences (F2G), FashionTech (Farfetch) and segments which have been historically strong in the UK.

A look at Europe

Despite a number of deals, European VC investment dipped below the $3bn mark in Q2 2016, the first time since Q4 2014. A sharp decline in UK investment, the report notes, was the primary cause of Europe’s slide.

Seed deal activity, the report adds, remains a strong percentage of overall VC funding across Europe, with seed or angel funding representing 49% of all funding rounds across the continent in Q2.

“While Europe as a whole lags behind the US and Asia in terms of VC investments, the region has long been a hotbed for early stage and seed deal funding,” the report says.

While funding remains available to companies, the report says that investors across the continent are scrutinising investments more rigorously before committing any funds.

“[They] are looking for companies that are able to control costs and that have a clear path to achieve profitability,” concludes the report.

Topics

Register for Free

Get daily updates and enjoy an ad-reduced experience.

Already have an account? Log in