Brexit vote is nothing short of a tight punch in the face of European startup scene and we seriously don’t know if Europe can recover from it.
In any tumultuous change, the weakest entities suffer the most, and in business, who can be the ones most exposed to the effects of the Brexit by definition? Startups, of course. And they might want to learn a new lexicon of Brexit-styled terms that’s coming their way.
When millions of refugees pile into Europe, top entrepreneurs will flee for brighter funding prospects. As funding rates across all stages decline in both London and rest of Europe, experienced entrepreneurs that need to raise money in a year or two will go where the money is: Silicon Valley, New York, Singapore, etc. Expect to see half of the top 5 percent of entrepreneurs leaving the region within the next two years. If you need money in Europe, get out now, as the diaspora will drain foreign funds, too.
If London is out from EU, who else but Berlin will dominate the decimated European startup scene.
Within five years, Berlin will go from being poor to the cool tech hub of Europe. The billions of dollars that once populated UK venture capital funds will gradually move over to German funds and the German efficiency will be put to work. In ten years, the first major crop of European unicorns will appear under the umbrella of Germany. If you don’t need to rise soon in Europe, then move to Berlin now.
The amount of funding for European startups will drop by 20 percent or greater by the end of the year. Approximately 50 percent of European funding is from London, and London dominates the later stage funding rounds.
I don’t see how London VCs will continue “business as usual” until the regulatory implications are better understood. Once London slows down the funding rate, particularly in the later stages, this will force the earlier stage European VCs to slow down as well. Forget about raising VC in Europe.
The corporate appeal of the Commonwealth to startups will dry up overnight. No startup in their right mind will go to a rainy island with no market and a stalled VC industry to incorporate a business.
The United Kingdom had become one of three major startup hubs to incorporate a business (Delaware, Singapore, UK) due to the rule of law, available capital and market access. Two of the three benefits are now gone, and the rule of law is changing, too. No startup should incorporate in the UK at this moment. If you are incorporating in the UK, stop now. If you need to incorporate in rest of Europe, go to Germany.