Brexit: uncertainty begins to bite for digital stakeholders

How much better informed are we when we have the full picture?

While our homegrown technology and digital sectors display bravado against the backdrop of an uncertain future, I wanted to find out what investors and entrepreneurs outside the UK felt had changed since Article 50 was invoked.

Moreover, how would this impact their future investment decision making, if at all?

While London proclaims itself as the ‘home of fintech’, what is the feeling beyond these shores? Is Brexit endangering the future prospects of the digital sector in the UK?

What better place to start to answer these questions than Paris. I explored the subject with Philippe Herbert, director of Kreaxi Ventures and well-known French technology investor.

“Our signature is hovering above the paper,” warned Herbert. “Until we know more about Brexit, and the resulting impact, we’re far less likely to invest in new UK deals. Don’t misunderstand, we do want to invest but the level of uncertainty is a problem. I don’t think I am the only French based investor who feels this way – this sentiment is consistent throughout the community.”

Minh Tran of AXA Strategic Ventures, another Paris based investor, agrees with Herbert.

“From my side, the UK valuations are now too high and start ups are moving back from the UK to hire resources and to obtain EU funding,” said Tran, adding, “We are not keen to scale our portfolio in the UK market.”

When asked the question ‘what should UK tech entrepreneurs be doing to Brexit-proof their businesses?’ Tran said: “UK technology and digital companies’ ability to scale outside the UK is key and I am seeing more and more start ups move from the UK to set up in Holland, Spain and France.”

I approached Pierre-Antoine Durgeat, a successful entrepreneur, digital leader and CEO of Adventori, to ask ‘what about entrepreneurs? Do they share this point of view?’

Durgeat’s response was straight to the point: “We just need to get on with it – get Brexit behind us and the sooner the better. The longer this drags on, the more uncertainty it seems to create – it’s not good for anyone.”

Another perspective came from Rolf Schromgens, founder and CEO of Trivago, one of the biggest brands in the digital travel sector worldwide.

“Any disruption of networks, restrictions of free trade and the flow of talent is negative for the whole system. I think that we will see suffering from Brexit, but of the course the UK by far the most. Nevertheless, I am confident that this is just a negative episode in an unbroken trend towards the mobility of people, goods and capital.”

More positive soundings came from our friends at Battery Ventures in Boston, USA where I spoke to VP Jordan Welu.

“We believe UK tech companies in particular will continue to thrive and sell their products globally post Brexit, including in the USA and EU. Many of the UK CEOs we speak with, and those already in our portfolio, have steered their companies through the turbulent waters of the dotcom bubble and the Great Recession. Similarly, while Brexit will not be without its challenges, we feel tech companies are resilient and capital-efficient.

“We do not expect Brexit to permanently damage the tech ecosystem in the UK and we will continue to seek to partner with promising UK firms.”

In conclusion, it’s obvious that no single person has the full picture yet – and as such, sentiment is understandably mixed.

What’s clearly dangerous right now is complacency and waiting for the hit before deciding how to respond. Although I sense the beginning of a much longer answer to my original question, it is clear that technology and digital companies should be investing time to explore the situation from all sides and not risk being carried away on the shoulders of exuberance.
 

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