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Start-up blog: The post-Brexit perspective

Matt Chittock

Matt Chittock discusses the future for start-ups post Brexit

It’s fair to say that in Britain’s busy co-working spaces there’s one topic of conversation that’s over-taken all others: Brexit. In the City, traders are still reportedly “shell-shocked” by the results of a national referendum they expected to end with remain as the clear winner. And it’s a similar story for the many British-based start-ups currently fielding calls from European contacts all wondering what on earth just happened.

The truth is, until Article 50 is triggered and trade deals start to be struck, even the smartest commentators don’t know for certain. Yet that doesn’t stop many start-ups holding strong views about what the future might hold.

"Until now, the country’s start-up scene – especially in London – has been vibrant and successful,” says Colin Pyle, CEO and co-founder of coffee pod start-up CRU Kafe.

“That’s why last year the capital attracted nearly half a billion pounds of venture capital funding. But the Brexit result means investing in UK start-ups has now become less attractive. We’re competing in a global market and exiting from the EU represents a substantial risk in the eye of investors. They will now be wanting more security  – either through higher fees or by taking a greater equity stake – than they did previously.”

Since launching in 2014 the company has grown its revenue from £100,000 to £2m – and is eager to expand. Pyle outlines how the business successfully completed a £1.25m funding round before the referendum took place in June. He believes that if they tried now he just wouldn’t be able to secure the same kind of deal, and that it would cost the company a lot more in the long-run.

“We were fortunate,” he adds. “But it’s a completely different kettle of fish for the other successful small companies out there.”

Outside of disappearing funding, another big worry is that Brexit will shrink the international pool of talent available to British start-ups. Pyle points out that in-demand workers like coders, engineers and designers, many of who are EU nationals, could be seriously put off working in the UK.

This might present a particularly big issue to the fast-growing British tech sector, says Martin Adams, CEO and co-founder of content intelligence platform Codec.ai.

“It can't be overestimated how much our digital economy relies on technical talent from Europe,” he says.

“These smart young things don't believe in borders or nationalities and work across time zones and, often, different companies. So they don't identify with the deeper identity-based, tribal rationales underpinning the referendum result. Instead they see a country closing itself off and trying to 'go it alone.'”

Adams says that it’s now the job of the politicians to counter this notion by ‘unashamedly’ talking up Britain’s tech sector to the world, rather than just letting venture capitalists, and the start-ups themselves, take up the slack.

“‘Brand Britain' has been affected,” he says. “We exported an image of ourselves as open, international and welcoming. The positive journey of that brand since it was most effectively communicated at the opening of the 2012 Olympics in London, has been knocked off course.”

He adds that start-ups will now need to think and act like global companies to survive, whatever their size.

“Proving to customers and investors that they service and create value for companies across multiple markets will help them weather the storm of the current economic climate where British businesses and investors are slowing their momentum,” he says.

These start-up owners know their stuff. Yet there is evidence that Brexit might not be as bad for Britain’s businesses as has been thought in some quarters.

Stats should always be taken with a pinch of salt. But business formation agent Company Warehouse has helped slightly alleviate the gloom by publishing a report which suggests the number of EU directors starting new businesses in Britain actually rose by 1 per cent the week after the referendum vote.

This seems to indicate that investors aren’t as worried as some commentators about the result of the referendum and it’s consequences for the British economy.

Also, whatever happens next, start-ups can always rely on the bravery and innovative thinking that inspired them to enter the marketplace in the first place. If the future is challenging, then forward-thinking start-ups well-used to overcoming barriers may be well-placed to meet it head on.

“Entrepreneurs have the flexibility to take a challenge and turn it into an opportunity,” says Adams. “You're always the underdog as an entrepreneur, but you create exponential value. We need more entrepreneurial thinking now, even if the future is unclear.”

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