eqtventures

Mind the gap...and I’m not just talking about funding

Alastair Mitchell

For the UK, the uncertainty of Brexit continues to loom and this apprehension has led to the rapid retreat of funding for UK funds and business. The most prominent of these is the European Investment Fund (EIF), which has frozen investments into UK funds and is predicted to leave a £900 million black hole for businesses. Cue other funds such as the British Business Bank and Draper Esprit, which plans to invest £75m into European seed funds over the next five years, leaping forward to plug the gap. This funding gap has also opened doors to many investors from unexpected places. Just last week, The Guardian threw its hat into the ring and launched a £42 million venture capital fund, GMG Ventures.

While it’s great that more people want to get involved in the world of venture capital, it's not just about the money. Collective expertise is crucial, as well as the capacity to make bigger funding investment at later stages and not just the smaller early stage investments. The ideal situation is to stay with a successful company throughout its funding journey and provide advice as the business grows and faces new challenges.

For almost a decade now, I’ve been banging on about the importance of a supportive entrepreneurial ecosystem and late stage funding. My Huddle days have made me all too aware of the challenges faced by entrepreneurs in Europe - and the UK in particular. Back when the UK’s former prime minister David Cameron set out the government's ambitious plans to create a tech hub to rival Silicon Valley in London's East End, there were two key barriers to this actually happening. The first issue was the lack of late stage funding. The dearth of larger pots of capital led to entrepreneurs - including me - heading to San Francisco to raise later stage rounds. The funds there dwarfed those available in the UK and I said on more than one occasion that “there is more money in one building on Sand Hill Road than there is in the whole of the European venture capital ecosystem.”

With US VCs brandishing bigger pots of cash and willing to take more risks, Europe’s most promising tech startups went West and the second issue cropped up. There was no supportive community of successful second and third generation entrepreneurs willing to advise and mentor the next batch of bright sparks. The sheer size and buzz of the support system in the Valley is well documented and this had to be replicated in Europe.

Times have changed. There’s now a vibrant ecosystem ready to help the next wave European entrepreneurs build global winners from Europe rather than moving to the US and selling out too early. The whole pace and change of expertise, recycling of knowledge, and innovation are fuelling Europe’s startups to success. Tech start-ups based in London, Berlin, Paris and Madrid are now really starting to rival those from Silicon Valley, which were previously seen as untouchable.

So when it comes to the UK and filling the gaps that are appearing in the light of Brexit, let’s not just focus on the capital. Let’s make sure that we keep the ecosystem as energetic and passionate as it is now, driving innovation and identifying the unique market opportunities that Brexit offers.