A £2 Billion European Investment Fund Has Stopped Giving Money To UK Tech Startups Because Of Brexit
Seedcamp cofounder Reshma Sohoni.
Take the example of Seedcamp. The pre-seed and seed-stage investor is in the process of raising a new fund, and was undergoing the EIF’s due diligence process. The fund was told this week that that process would now be “indefinite,” a source said. Seedcamp did not comment, but did confirm it was in the due diligence process.
“What might happen is that the EIF will say ‘Maybe, maybe, maybe’, and then Seedcamp will close without them,” one source said. “That’s a nice way to say: ‘We didn’t say no.’ It’s not a yes either.”
Another said that the EIF wouldn’t fund anyone who hadn’t already received a final approval letter.
Dawn Capital and Hoxton Ventures did not comment.
One of the sources said the EIF had decided not to expand a €250 million (£214 million) angel investment scheme to the UK, after the decision to leave the EU. The European Angels Fund is a co-investment scheme where the EIF will match investments by business angels into startups, then allow them to keep the bulk of the profit from the deal. It’s available in seven EU member states and, the source said, was due to expand to the UK this year.
The source said the EIF had planned making €50 million (£43 million) available to British angels for early-stage deals. That “died” after the Brexit vote, the person said.
The EIF is one of the biggest sources of funding to British VCs
The European Investment Fund is seen as an “anchor” investor for British venture capitalists who are raising new funds. It has put €2.3 billion (£1.9 billion) into 144 UK venture capital firms between 2011 and 2015, according to internal figures.
VC funds are designed to have a ten-year lifespan, at the end of which investors expect to see a return through an exit. About three to four years through that lifespan, VCs will begin raising a new fund.