- Over half (52%) of Seedrs customers believe London will stay in top position for new ventures
- Professional services, manufacturing, financial services and technology ventures will win out
- Regulatory uncertainty, not access to capital, is biggest concern for entrepreneurs
- Appetite for alternative investment will grow, particularly for crowdfunding
New research from Seedrs, Europe’s No. 1 equity crowdfunding platform, finds that London is predicted to remain a global hub for international entrepreneurs, following the results of the recent EU referendum. Over half (52%) of Seedrs customers polled1 by Seedrs agreed that London would retain its position as a global centre for innovative new businesses, while only 16% said they believed London would lose out to other international hubs and the remainder (32%) said they did not know.
The sectors predicted by both investors and entrepreneurs to see the strongest opportunities for growth over the next 12 months in light of the Brexit vote include professional services such as law and accountancy (cited by 29% of respondents), manufacturing (21%), financial services (20%), IT and telecoms (20%), hospitality and leisure (17%) and property (16%).
Entrepreneurs’ biggest concerns post-Brexitare dominated by uncertainty about the future, rather than by potential lack of access to business finance. More than four-in-10 (41%) said their key worry was uncertainty regarding regulatory change and the same proportion (41%) said they were most anxious about losing European trade. Low growth levels were cited by 35% of entrepreneurs and losing foreign direct investment by 33%, while 27% said rising unemployment was a concern. Only 15% said they were worried about lack of access to business finance post-Brexit.
When asked their opinion about why there may be an increased level of appetite for alternative investments following Brexit, the main reasons given by investors were portfolio diversification (93% of respondents), tax benefits (48%), lack of correlation with mainstream asset classes (39%) and the fact that alternatives have produced strong medium to long term performance returns. Of those planning to increase their own investment allocation in alternatives, 69% said they expect to invest more heavily through crowdfunding.
Jeff Lynn, CEO & Co-Founder at Seedrs said: “We haven’t seen any slowdown in investment activity since the referendum, and we believe strongly that the UK remains highly attractive for inward investment. Our research supports the view that London will continue to be one of the top destinations for entrepreneurs looking to set up a business. It also shows that equity crowdfunding is still a great source of capital for entrepreneurs looking for first, second or even third round finance.”
Simon French, Chief Economist at Panmure Gordon, said: “Economies across the globe are facing similar political upheavals, and investors are fully aware when deciding where to locate capital. We believe that a negotiated ‘soft Brexit’ rather than a ‘hard Brexit’ will enable the UK to remain dynamic and stay ahead in the global race for talent. The UK can use Brexit as an opportunity to broaden its horizons beyond Europe and reject the ideas of protectionism.”
Gray Stern, COO and Co-Founder at successful peer-to-peer lending specialist Landbay, agreed: “If I was launching Landbay again in the current climate, London would still be my number one choice, Brexit or no Brexit. New start-ups can benefit from the economic conditions in London and as long as they keep their messages focused, digestible and realistic they will continue to secure equity investment.”
Julian Sutton, an early-stage business investor, added: “There’s real potential for small firms to take advantage of the opportunities that will be created by Brexit. Even if there is an economic downturn post-Brexit, businesses that launch during a perceived higher risk climate can often result in better quality businesses due to the challenges they have had to manage through. It is still vitally important to support start-ups during this time to ensure the continued growth of the innovative early stage business ecosystem here in the UK.”
Seedrs has now funded more than 380 deals since launch in July 2012, and based on global ranking system Alexa, has significantly more people using its platform than any other UK or European equity crowdfunding platform. Beauhurst, a leading source of objective deep data on UK startups and scale ups, ranked Seedrs number one investor in private companies in the UK this July with 78 funded deals at the halfway point in 2016, also ranking number one in a number of categories of investment.
Earlier this year, Seedrs was named a Bloomberg Business Innovator 2016, an accolade that recognises “the people changing how the UK lives, works and thinks,” as well as joining Tech City UK’s Upscale Programme of 30 of the fastest-growing UK tech companies.