The Brexit Effect on the Startup Ecosystem

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The Brexit vote will have a wide-ranging impact on the UK startup ecosystem

The Brexit vote will have a wide-ranging impact on the UK startup ecosystem

The big news this week: the exit of the United Kingdom from the European Union. A decision initially posed to quell political unrest looks like it will have a wide range of lasting impacts. Looking closely from a startup ecosystem standpoint; here are a few key ways that this will impact both the UK and EU startup ecosystems.

  • Talent Acquisition

Easily the biggest impact that this has on startup ecosystems is the ability to bring the best and brightest to startups in the UK. Startups based in London, Belfast, and across the UK previously had the broader EU talent pool to pull from. For example; a Manchester-based founder could bring on a developer from Poland, Czech Republic, or any of the other EU countries with vast pools of engineering talent. This is no more. With the Brexit comes the massive hurdle of securing work visas (something we are very familiar with here in the US) making it much more costly to hire the best talent. For a startup, recruiting is one of the most important things that a company needs to survive the early days. The decision to leave the European Union puts a heavier burden on UK-based founders to either scour the fairly small UK market for talent, to build remote teams, or to move from the UK altogether.

  • Fund-Raising

Financial regulations being managed at the EU-level meant that UK-based founders could engage angel investors and venture funds across Europe. Technology-focused investors from places with where startup ecosystems are just taking off like France and Spain could invest in UK-based startups fairly easily. Although it is unknown how exactly this will impact the financial regulation, it is clear that easily moving capital between the UK and continental Europe will be much more difficult. The UK currently has one of the strongest financial sectors in the world with one of the largest pools of investors. Experienced entrepreneurs will have no trouble raising money from well-capitalized technology investors based in the UK. Less experienced technology investors in startup ecosystems outside the EU will now have trouble participating in rounds led by UK-based founders. Also, startup founders that are having trouble securing funding in the UK will now have more difficulty bringing in capital.

What Startup Ecosystems Could Benefit from Brexit

Startup ecosystems rely heavily on their ability to connect abroad. Breaking away could jeopardize the growth that the UK and especially London have seen due to having a robust startup ecosystem. This leaves the door open for a few other European startup ecosystems to rise in the order of being the best European city to build a startup (if they don’t follow the UK’s lead in leaving the EU):

  • Dublin, Ireland

Cheaper than London (although not by much),a growing pool of experienced sales talent, and favorable tax regulations regulations for Ireland-based startups combined with the EU talent pool make Dublin a very attractive place for startups. Startup Dublin has been making massive strides in getting companies comfortable with the idea of being based there and BREXIT can only improve on those efforts.

  • Berlin, Germany

Berlin’s incredibly international population, low rents, and strong technical population make it a great place to think about building a startup in Europe. The international feel of Rocket Internet, SoundCloud, and a few other Berlin startups are a nod to how this differentiation helps build companies.

  • Barcelona, Spain

Spain’s an up-and comer the broader European startup ecosystem with its strong mobile talent and great quality of life (the weather, the food, everything). London's closed boarders and dreary winters will make Barcelona's beaches look even for founders looking to build a company.

Dark-horses:

I’d love to hear anyone else’s thoughts on impacts (good or bad) from UK’s break from the UK and other startup ecosystems that might stand to gain.