We need to talk about Brexit and the effect it is likely to have on the London tech sector. The immediate aftermath of the EU Referendum result was dominated by stories of recruitment and investment deals being withdrawn or falling through.
Amid the confusion, there was a fear that London’s position as the digital capital of Europe would be lost to competition from the likes of Berlin, Paris, Dublin, Stockholm and Amsterdam.
Hours after the result, London startups were holding emergency board meetings; shocked at the result. Unlike other sectors such as banking and insurance that had crisis management plans in place, London startups appeared to have no back-up plans and its tech ecosystem looked extremely vulnerable.
Two months on and as the holiday season dissipates like the sunshine within it, are there rays of hope for London post-Brexit or has the exodus of talent to continental Europe began?
The signs are that London is holding firm. New research from agency London & Partners reveals that investment into London and UK-based technology companies remains strong since the Brexit vote, with UK tech firms attracting $200m of venture capital funding across 42 deals.
Leading global investment firms have committed to continue investing in the UK’s tech sector saying that London will remain an important destination for investment despite the vote to leave the European Union.
Venture capital houses such as Index Ventures, Octopus Ventures, Balderton Capital and Hoxton Ventures are among a wider group of investment firms to pledge their continued support for the UK’s tech sector, with many citing London as an important hub for future growth.
A number of tech companies announced funding in the post-Brexit including music festival booking site Festicket ($6.3 million), Network Locum ($7.55 million), London based fintech firm Revolut ($9.61 million) and what3words ($8.5 million).
Moreover, Santander announced that its London-based venture capital fund has secured an additional $100 million to invest in UK fintech companies.
In the first six months of 2016, UK companies attracted $1.3 billion in VC funding, matching the $1.3 billion raised in the same period in 2015. Some of the largest deals this year include London-based transport app Citymapper ($40 million), Student.com ($60 million) and a $65 million deal for UK cybersecurity firm, Darktrace… completed after the referendum vote.
“London’s tech industry was united in its support for Europe; 87% surveyed wished to remain in the EU. The result was met with shock and dismay, but the entrepreneurial mindset always turns adversity into opportunity and the private sector has focused on the long-term future of London’s tech sector as a world-class tech hub”, said Russ Shaw, founder of Tech London Advocates.
London’s status as a vital tech hubs for investors is further supported by separate research, which found that in the last five years London’s technology sector received more VC investment than any other major European city. At time of writing, there are now 253 different VC funds operating out of London.
Since 2011, London’s tech companies attracted $6.64 billion in 2,894 deals, outperforming other European cities including Paris, Berlin and Stockholm. London also attracted over four times more venture capital investment than Dublin and Amsterdam.
Over a five-year period, private equity firms have completed more deals for London-based technology companies than for any other European city, investing a total of £12 billion. Likewise, M&A activity has remained buoyant, with investors pumping $65.3 billion across 572 deals into London technology firms from 2011-2016.
Dangers, however, remain. The ongoing fall, if not quite collapse of sterling, means that acquisitive companies may see London startups as potential bargains. London’s tech talent may not flee to continental Europe, but it may be subsumed by foreign acquisitions.
This potential development may have a upside. The original tech hub in Silicon Valley may have be a one-off due to a number of factors over decades, but it was the Valley’s continual exits that maintained its evolution, with many of those exits re-investing into smaller Silicon Valley startups.
London’s resilience is legendary, not least when German WWII were trying to bomb it to smithereens, and there is no doubt that the Brexit vote is a huge challenge to its status as Europe’s most important tech hub. However, in typical London fashion, it appears that its tech sector is not wilting or floundering, indeed it may even be prospering.
This article was written by Monty Munford from Forbes and was legally licensed through the NewsCred publisher network.