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Alternative Market Briefing

Brexit hits venture capital in the UK

Friday, November 01, 2019

Bailey McCann, Opalesque New York:

As Brexit negotiations drag on, LPs and GPs are looking more closely at the impact to venture capital. As an asset class, venture capital is typically uncorrelated to broad geopolitical trends that might move markets, but according to delegates at the recent Opalesque European PE & VC Roundtable, Brexit may have more of an impact than investors expect.

"The UK market has been effective particularly in growth capital and late venture capital and that is now changing," said Dr. Jim Totty of Earth Capital. "The UK will probably lose access to the European Investment Fund (EIF). The EIF had 140 LP positions in the UK, right across the spectrum, everything from life science to the digital sector, and the creative industries, for example." He adds that it's not fully clear what the scope of the potential impact will be.

Some industries could end up doing better than others. Dr. Totty said that industries like digital media that have less overhead may be able to thrive in the UK as Brexit continues to be negotiated. In other areas like life sciences, the greatest strength is likely to be seen in areas where early stage funding is already very well understood and institutional investors are willing to fill any gaps in VC funding.

If the UK enters into a deep recession as a result of Brexit or other economic concern, delegates expect that corporate venture capital will also slow down. Corporate venture capital has increased in rece......................

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