Referendum saw 40% drop in UK tech start-up investment

However, VC activity already starting to pick up in Q3 with £174m invested so far

In the run up to the European Union referendum, venture capital (VC) investment into UK tech start-ups fell by 40% – according to CB Insights and KPMG’s quarterly Venture Pulse report.

Investment into UK firms fell to £549m in the second quarter of 2016; down 43% on the previous quarter and 46% on the same period last year. Meanwhile, the number of deals dropped by 8% to 104 – a 15% decrease on the second quarter of 2015.

Despite this, there were some major financial technology (fintech) deals in the second quarter of 2016 including an additional £18m for TransferWise and a £40m investment into LendInvest.

UK businesses still attracted the largest share of funding across Europe – where investment fell by 20% to £2.1bn – and there are signs that investment activity is starting to pick up: £174m has already been invested so far in the third quarter of 2016 with more than 25 deals.

Most notable, cyber security firm Darktrace raised £49m earlier this month in a Series C round that was thought to be one of the largest investments of 2016 so far.

The report stated: “The outcome of the UK’s referendum to leave the European Union has introduced new uncertainties into the VC market – ones that could linger in the quarters and years ahead.

“With no defined plan in place as of yet for an exit, however, most investors recognise that knee-jerk reactions post-Brexit are not the right solution.”

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