Is Brexit to blame for a sharp decline in UK startup funding?

It seems doom and gloom was the order of the day in 2016, with emerging data providing a flurry of nails in the year’s long-awaited coffin. And the tech industry wasn’t exempt; compounding the miserable year comes the news that UK startups suffered a drastic fall in funding throughout 2016.

Is Brexit to blame for a sharp decline in UK startup funding?

Data from Beauhurst, a company that analyses the fast-growing businesses in Britain, reveals that the total amount invested in UK startups fell 12% to £4.1 billion in 2016. Deal numbers, meanwhile, fell by a hefty 18% to 1,460 last year. The figures represent the first annual drop in startup investment since records began, back in 2010. And, whilst business was somewhat slow in even in 2015, the stats from last year exhibit what Beauhurst deems “a dramatic halt to years of growth” and a “worrying trend for the short to medium term.”

In an unexpected turn of events, it seems the blame can’t be placed solely on everyone’s favourite scapegoat, Brexit. Whilst the divisive decision may be partially accountable for a general slow-down, the busiest month for investment was actually September, a couple of months after Britain voted to sever ties with the EU. Alas, it seems one can’t even indulge in a Brexit-bashing bout of catharsis.

It wasn’t all bad news though. Crowdfunding is playing an increasingly dominant role in the world of start-up funding, providing an alternative way for companies to raise capital. Beaufort believes that crowdfunding is “emerging as a real alternative for funding later-stage companies”, indicating that it’s not just nascent startups seeking alternative means of funding.

Overall, the total number of crowdfunding campaigns fell by 14% compared to those in 2015 but Crowdcube, one of the UK’s biggest crowdfunding platforms, assured everyone of the industry’s buoyancy, reporting a 20% investment rise in the six months proceeding Brexit.

Despite the gloomy figures, CMO Luke Lang was positively jubilant, saying in a statement: “While the Government tackles the economic and political outfall of the decision to leave the EU, we believe British businesses are becoming more attractive to investors right now, particularly with the country’s reputation as a centre of excellence for fintech and other highly disruptive startups.”

So don’t expect tumbleweed rolling through the UK’s tech hubs just yet (except, ironically, in Silicon Roundabout, where astronomical rent is forcing startups to move elsewhere). One area showing incredible growth is the life sciences industry, with Beauhurst revealing an impressive 19% increase in early stage funding, up to £202 million. Meanwhile, big-league deals are still being made: Deliveroo received a £210 million investment in August, followed by Skyscanner, which raked in a not-too-negligible £128 million in a deal.

So before you resolve to burrow back under the covers for the rest of 2017, remember that there’s hope yet. Particularly for the notoriously large demographic of people working in crowdfunded life science startups. Hmm…

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