Crisis or opportunity? Seedcamp’s Reshma Sohoni on Brexit

30 Jun, 2016

It’s a common complaint that not enough big-name tech investors pay attention to the North. Seedcamp is a notable exception. Among its portfolio of startups are names like Formisimo and Rentlord that will be familiar to readers of this site.

I caught up with Seedcamp Partner and Co-founder Reshma Sohoni for her views on tech in the North, and how the looming Brexit might affect venture capital and startups.

Northern momentum

Sohoni believes that there is still work to be done to strengthen tech clusters across the region. “The ingredients are not formulated fully yet.” But as an international investor, she’s seen plenty of strong ecosystems that the North can learn from.

“Each cluster needs to form some level of independence – its own momentum, from universities, to startups, to angel investment. You need your own momentum within a 50-mile radius. Clusters need differentiation – a gravitational force around a sector or expertise.”

Sohoni is clear that the city a startup is based in has no bearing on whether Seedcamp will invest or not. That said, she believes that a presence in London is “indispensable” for Northern startups as they grow.

That connection with the capital city can be about access to investors, clients or talented staff. Sohoni says that there is currently a much stronger connection and “flow” between Berlin and London, or Tallinn and London, than there is between the North and London.

Facing up to Brexit – advice for startups

The UK venture capital industry has held firm in the face of Brexit. Seedcamp, Index Ventures, Entrepreneur First, Saul Klein and others have asserted their continued confidence in the country’s tech sector.

Sohoni says that for Seedcamp, “everything’s changed and nothing’s changed.” In fact, in the immediate term the falling pound has worked out well for the London-based firm. Its fund is in euros, its cost base is in pounds sterling and it’s just had an exit (Stupeflix, which sold to GoPro) in dollars. That’s a favourable combination of exchange rates for the company.

For startups, she says that now is a good time to get intimately familiar with every aspect of your business, and any possible exposure you might have to Brexit-related risk. “Look at where you’re incorporated, your staff. There’s nothing you can action, but you need to become very knowledgeable about what’s happening in your business.”

Seedcamp is advising its portfolio startups to calm their customers. “Tell them that technology can give them an advantage in an uncertain world.”

Sohoni says that Seedcamp will look to influence policy to help startups in a post-Brexit world. For example, a visa conversion programme for EU citizens working in UK tech companies would be one useful possibility.

What’s next for investors?

The withdrawal of access to the European Investment Fund will be a problem for UK-based funds, including Seedcamp. Sohoni wonders whether UK organisations like the British Business Bank might step up as a limited partner for VC firms. That would help prevent a collapse in the venture capital available to UK startups.

The future of tax relief for investors via the Enterprise Investment Scheme is also on Sohoni’s mind. Would it survive an overhaul of the taxation system?

“We’d crossed the chasm of funding, there’s lots more choice than there used to be. Now it’s like ‘are we going to fall off another cliff?'”

But while the current situation can feel like a crisis, Sohoni says it’s also an opportunity for something new, fit for the way people do business today. “In the mid-term, the UK can write its own rules. To what extent will we get leading edge, simpler, understandable laws for the world we’re living in now?”

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