How Brexit killed Singular Ventures

Anti-Brexit campaigners in
Westminster.
Jeff J Mitchell /
Getty

• It’s become harder for tech startup investors to raise
  money for their funds in the wake of Brexit.
• That’s partly because of the two years of economic
  uncertainty that followed the vote.
• Two British startup investors, Ali Mitchell and Ben
  Tompkins, told Business Insider how Brexit stymied their plans
  to launch a European fund.
• They say the UK’s burgeoning tech industry will adapt,
  but will be poorer for the uncertainty and dropoff in
  international talent.

It’s been more than two years since the UK voted to leave the
European Union in June 2016.

The outcome
horrified a large proportion of the UK’s community of
entrepreneurs, investors, and executives, many of whom have
thrived thanks to strong links with Europe.

For investors, one of the most serious post-Brexit threats was
the potential loss of a major backer, the European Investment
Fund (EIF).

A chunk of the money that is invested into startups via venture
capital comes from government institutions, as well as entities
such as insurance firms and pension funds. In Europe, a large
slug of venture funding — around
10% — comes from the EIF, which is ultimately controlled by
the European Investment Bank.

The EIF is what is known as a “cornerstone” investor, meaning it
will commit to providing a substantial chunk of a new fund.
During the long and arduous process of raising a new fund, the
EIF’s involvement can act as a catalyst to persuade smaller
investors to buy in.

Fund managers’ worst fears came to pass when they discovered the
EIF had quietly hit pause on investing in British funds after the
2016 vote.

The Treasury responded to the threat, promising an additional
£400 million to the EIF’s UK equivalent, the British Business
Bank. It took a year to happen, but theoretically, it would mean

funds struggling to raise cash would be able to “close”, or
complete. Except for one new fund.

Singular Ventures was a new UK-headquartered fund aiming to take
European startups to the US

Ali Mitchell.
EQT
Ventures

In late 2015, Alastair Mitchell was letting go of the reins at
his enterprise software startup Huddle. A British entrepreneur
who had moved to San Francisco to take Huddle international,
Mitchell decided to hand the CEO role to a veteran executive, and
was thinking about his options.

He felt he had another startup in him, but also felt he could
offer advice to European startups trying to expand into the US,
just as Huddle had.

“Could I combine the two and start my own fund? That’s how
Singular Ventures was born,” Mitchell told Business Insider in an
interview.

Enter Ben Tompkins, a venture capitalist at Eden Ventures who had
invested in Huddle’s seed round. “I was Ali’s first investor,”
Tompkins said. “He had great experience of being an entrepreneur
and CEO, and had gone to the US.

“I had experience of being a banker and an investor. We came
together and said let’s combine forces… [let’s] try and raise a
fund to focus on early-stage European software companies. I would
be in London, and Ali would be in San Francisco.”

Ben Tompkins.
Draper
Esprit

Michael Stephanblome, an investor at Eight Roads, is also listed
as a one-time partner in the fund in British financial filings.

Tompkins characterised Singular Ventures as being the third fund
for Eden Ventures but with some young blood on board. To that
end, the fund was rebranded and the trio approached many of
Eden’s backers, and the European Investment Fund.

“We knew founders wanted it, we knew the market needed it, and we
knew Europe as an overall market was starting to produce some
amazing startups,” Mitchell said. “All was looking good
pre-Brexit.”

Unfortunately, they were pitching the EIF
just as the organisation hit pause on UK funds. There was a
double killer in that, at the time, no one actually understood
what was happening in the immediate aftermath of the referendum.
The EIF appeared to be giving mixed messages to investors, fund
managers told Business Insider at the time.

It wasn’t just technology either. Energy, manufacturing, and car
companies all warned that
uncertainty was bad for investment and business.

According to Mitchell, the EIF wasn’t the only investor with
doubts. “None of the funds were sure — it could have been the
EIF, or local funds, or commercial and pension funds. No one was
sure,” he said.

Tompkins added: “You had some investors interested in a UK-only
structure, some in a European structure, but frankly we couldn’t
pull it off where we could find investors [interested] in a
pan-European fund based out of London.”

The uncertainty, the pair said, meant they couldn’t continue to
raise funds.

“We were determined to ride it out and believed in our thesis,”
said Mitchell. “But no one [was] in a position to do anything for
18 months. That was tragic. And although it will come good, two
years is a long time in startup land.”

Several funds struggled to finalise their funds after Brexit

Reshma Sohoni, cofounder of Seedcamp, which
successfully closed a new fund after the Brexit
vote.
Seedcamp

Neither Tompkins or Mitchell were willing to criticise the EIF,
saying that as a mostly state-funded organisation it was natural
to be cautious. “They were in a difficult place of trying to
please all people all the time,” Mitchell said. “I would
characterise [post-Brexit funding] as a political football.”

Business Insider has contacted the EIF for comment. At the time,
the organisation claimed it wasn’t pulling out of the UK but that
it did need to carry out more due diligence on British
investments.

Singular wasn’t the only venture capital outfit affected,
although it appears to be the only one actually driven out of
business. Sources told Business Insider last year that
early-stage firms Dawn Capital, Episode 1, Seedcamp, Hoxton
Ventures, and Crane Ventures were all impacted by the EIF’s
decision to pause. Dawn, Episode 1, and Seedcamp did eventually
successfully close their funds.

Mitchell calculated that it has taken about 18 months for the UK
to get its act together, in terms of filling the EIF gap. The
British Business Bank is starting to invest in some venture
capital funds but, Tompkins said, it’s not yet “up to full
speed.”

Brexit will have a long-term impact on talent

Both Mitchell and Tompkins remain in venture capital and are
optimistic.

Mitchell joined EQT Ventures, a pan-European fund mostly staffed
up by former entrepreneurs. Like Mitchell’s original vision, EQT
helps European firms launch in the US, and vice versa. “It is
everything that I as a founder believe has been missing in the
investor and startup community,” he said.

But, like many others in the industry, Mitchell remains hugely
disappointed by the outcome of the vote and believes it will dim
some of London’s shine as a startup and talent hub.

“All constituents in the business community are… saying ‘This
is crazy, we have to move back to a previous situation where
talent and money can move freely,'” he said. “It’s to no one’s
benefit to move to an insular, closed market.”

Tompkins, meanwhile, joined another venture capital firm, Draper
Esprit, as a partner. Ultimately, Tomkins thinks the EIF’s
reduced influence over British venture capital might encourage
new models for venture capital. Draper Esprit, for example,

raised money by going public in 2016, and reported a profit
after tax of £65.3 million in the year to 31 March.

“[Draper] had had the uncertainty as well, but they found a way
forward which was to take the company public and use that as a
way to make money,” Tompkins said. “Two years ago, people would
have said that’s a brave thing to do.”

Ultimately, Tomkins said he has no regrets. “Life’s too short to
cry over Brexit.”