Rich Pleeth was cycling from Paris to London for charity last Friday when he got the bad news.
The United Kingdom had voted to leave the European Union and global markets were reeling. Stocks had shed trillions of dollars. The pound sterling was plunging. And at Sup, the friend-finding app that Pleeth founded in London in March 2015, four investors who were scheduled to sign funding contracts that day (June 24) were about to jump ship.
Before the vote, “we were like, ‘Don’t worry, we’ll just sign on Friday,’ because we were pretty confident we were going to stay in,” says Pleeth, a former chief marketing officer of ride-hailing company Gett. But the referendum results didn’t cooperate. “We had four people—two angel investors and two institutions—and they’ve all come back to us saying, ‘There’s too much instability at the moment, you’ve just got to count us out.’”
Sup is unlikely to be the only tech-financing casualty of the Brexit victory. Within hours of the official vote tally, Mike Butcher, editor-at-large for TechCrunch in London, was hearing of deals lost to the decision.
Other tech companies are worried about how they will scale when they can no longer hire talent as easily from outside the country. Nathan Benaich, an investor at Playfair Capital in London, says he knows of one artificial-intelligence startup that was close to landing two highly sought-after French research scientists, only to have them back out during the final stages of their interviews because of Brexit.
Prominent London investors, meanwhile, are publicly insisting that everything is business-as-usual. Partners at some of London’s best known firms are offering a familiar refrain: that the strongest companies are born in the toughest times. “We haven’t seen [deals cancelled] and likely won’t,” says Reshma Sohoni, of seed-stage investment firm Seedcamp. “The best time to invest is in a downturn.”
“The best businesses are created in difficult times,” says Michael Jackson, of Mangrove Capital Partners. “Prices become more normal, and there is more work and fewer roof-top parties.”
Financing to venture-capital-backed startups in the UK stayed relatively strong in the fourth quarter of 2015, even as funding to private tech companies globally retrenched. The question now is how Brexit will affect the willingness of investors to put their money behind startups in the UK, especially if public markets remain tumultuous.