Is Brexit behind Europe’s investment lull?

11322953266_562d8fd969_h
11322953266_562d8fd969_h

Europe’s startup environment has looked better: The total number of investments across Europe slumped in the third quarter of 2016, according to several industry reports published earlier this month.

The Europe-wide trend showed that fewer deals were made and less money was invested as compared to the second quarter – signalling that investors have become cautious.

There is no single statistic available that speaks to all of Europe’s VC-investments and deals but a clear trend is apparent when comparing analyses provided by CB Insights/KPMG, Dow Jones VentureSource, Tech.eu/Dealroom.co and PitchBook/MerillCorp.

Three of the four analyses showed fewer deals in the third quarter and a decrease in funding that ranged between 17 and 32 per cent, as compared to the second quarter.

When comparing numbers to the third quarter of 2015, the amount of money invested had also decreased between 17 and 39 per cent, whereas the number of deals was just over last year’s amount.

The cause of the decrease is unclear, but Brexit, Britain’s shocking decision to leave the EU, is thought to play a role.

“The UK’s unprecedented decision to leave the EU has certainly thrown a shadow of uncertainty over Europe’s VC and startup ecosystem,” Adam Pang, Senior Director of the Merrill Corporation, said in the report.

“A number of VC investors are beginning to evaluate Brexit impacts on a case-by-case basis,” he continued said.

According to Tech.eu the lull in the UK seems to be a “reaction to June’s Brexit vote,” but Germany’s numbers could also be the result of “reduced activity from what was its most active investor, Rocket Internet.”

“The full impact of Brexit on the UK economy and VC market are expected to become clearer over the next 2-3 years as the UK negotiates the terms of its exit from the EU,” the CB Insights/KPMG report said.

But London can expect other European VC hubs, like Berlin, Dublin, Barcelona and Paris, to use Brexit as an “opportunity to attract potential companies and VC investors to their communities with the hope of growing their existing tech hubs and ecosystems,” the report said.

Evidence presented itself earlier this week when Bondora, an Estonian credit platform, announced they will no longer move their new European office to London, but will instead opt for a German city. It looks to be either Berlin, Frankfurt or Munich.

“There is too much uncertainty, the UK lost its attractiveness as a fintech hub” said Bondora’s CEO Paertel Tomberg.

This article was originally published on Gründerszene.
Photo credit: kenteegardin via Visual hunt / CC BY-SA