With challenges come opportunity: VC FinTech Investment Post-Brexit
By Tim Levene, Managing Partner, Augmentum Capital
‘There is a Chinese curse which says “May we live in interesting times.” Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind.’
Robert F. Kennedy, 1966
50 years on and it’s hard to imagine a more apt summation of the European FinTech landscape. 2016 has certainly had more than its fair share of challenges, both politically and economically, but as ever, with challenges come opportunity and the quality (and sheer stubbornness!) of entrepreneurs continues to shine through.
The decision to “Brexit” has created significant uncertainty amongst the investor community. The opportunity in financial services is immense and whether the UK is inside or outside of the European Union, entrepreneurs and their innovative business models will find a way to tackle the opportunity and provide the market with better, cheaper financial services. The complexity, accessibility and sheer inefficiency of what is currently on offer combined with the talent, hunger and technology at the fingertips of those challenging the incumbents makes that a given.
The uncertainty our political masters have created however is less easily dealt with. Uncertainty erodes confidence and market confidence is as important to getting businesses funded as the quality of the idea itself. Maybe even more so. The falling value of sterling, questions over the single market and passporting regulations conspire to make funding decisions both at the investment level and fund level more challenging. It is inevitable that Europe’s biggest supporter of venture capital, The European Investment Fund (EIF), will reduce its exposure to UK venture. That gap will need to be filled and The British Business Bank must step up and fill the funding void that Brexit will create. In the absence of government filling the void, there is a great deal of talk of sovereign wealth funds looking to the UK for investment opportunities, in particular through exposure to UK Tech. The early indications would suggest that for now it is much talk and little substance, but there can be few more attractive opportunities than UK FinTech.
It is easy to see how innovation can address opportunities we see today, it is much harder to know how that will continue when it is not just the goalposts moving, but they are possibly changing shape along with the playing surface itself.
And yet despite that, the enthusiasm we see in the entrepreneurs we meet is both resilient and contagious. The fundamentals don’t change — the opportunity is huge, the status quo doesn’t work, the technology to enable change keeps improving. The FinTech wave is just beginning. Our challenge is to convince the institutional investor community to believe in the future potential of the UK, in particular our ability to build the next generation of great tech-led financial services companies.
Robert Kennedy’s quote seems peculiarly suited to today’s FinTech landscape but it would be even more so if instead of referring to “living in interesting times” as a curse, it referred to it as a blessing instead.