Theresa May’s striking a deal with the European Union didn’t put an end to the idea that European companies will have to deal with chaos for years to come, both in the U. K. and on the continent. Yet one sector, that of tech startups, doesn’t share these concerns, and there are four reasons for that.
Brexit, it is said, is bad for business. And Theresa May’s striking a deal with the European Union didn’t put an end to the idea that European companies will have to deal with chaos for years to come, both in the U. K. and on the continent. Indeed in sectors such as financial services and manufacturing, much depends on the final terms—and those are far from being clear.
And yet one sector, that of tech startups, doesn’t share these concerns, and there are four reasons for that.
Theresa May delivers a statement on the Brexit agreement on Thursday, Nov. 15,2018. Photographer: David Levenson/Bloomberg © 2018 Bloomberg Finance LP
First of all, startups are used to obstacles to doing cross-border business. There’s a general idea that the European Union is a single market, but this is only true, and even then only to a certain extent, for singular industries such as tangible goods, airlines, energy and railways. On the other side, many other industries such as healthcare, urban transportation and real estate are still highly fragmented in terms of language, culture and regulations. This doesn’t prevent tech entrepreneurs from trying to grow pan-European businesses in those industries. But cross-border gaps and frictions are already a reality for many startups, and Brexit will hardly make things worse.
Second, startups thrive in chaos. It is said, with reason, that the financial crisis greatly accelerated the rise of tech companies. Airbnb, which started operating in 2008, provided an extra income stream that helped many pay their rents in difficult times. Uber, which was founded in 2009, could rely on the numerous workers who were out of a job and looking for a fast way to make ends meet. More generally, startup founders master the art of solving problems, and the chaos into which Brexit will likely plunge the U. K. and Europe will provide entrepreneurs with many opportunities to practice that art.
Third, there’s a convincing scenario in which European tech remains unified despite the gradual demise of the European Union. Like happened a century ago, international institutions are currently unraveling at an accelerated pace —and the European Union is no exception. Like the gold standard in its time, the European Union was designed to provide macroeconomic stability and security. In that regard, much like the U. K. abandoning the gold standard in 1931, Brexit is simply one early episode of an old economic order collapsing before our eyes. And as member states drift apart, there will be demand for non-state entities capable of bridging the barriers and smoothing over the frictions involved in the exchange of goods, services, ideas and people.
In The Great Transformation, Karl Polanyi reminds us that peace and prosperity were maintained in 19th-century fragmented Europe thanks to the widespread power of what he calls “ haute finance”. Unlike its American counterpart, the European tech sector is far from the kind of mitigating power held by the legendary House of Rothschild when it operated in London, Paris, Frankfurt, Vienna and Naples. Yet it’s probable that technology, like 19th-century haute finance, has a role to play in unifying Europe as feeble nation states retreat behind their borders. I’m thinking here of venture capital firms successfully operating at the pan-European level, like Index Ventures and Accel, and global tech platforms dedicated to bridging the gaps that separate countries, such as Amazon Web Services for cloud computing, Stripe for payments, and Revolut and TransferWise for borderless banking. Who needs a functioning European Union when entrepreneurs can rely on such a broad and supportive platform?
Fourth, post-Brexit London will likely remain the unchallenged startup capital of Europe, supporting European entrepreneurs with the many resources it has to offer. Britain used to be a thalassocracy, a seapower willing to compete on the global stage. From that glorious past, it inherits a culture that perfectly fits the current Entrepreneurial Age.
What’s more, the English language provides the U. K. with an extraordinary opportunity to achieve strategic positioning on the international stage. Many thought leaders and media organizations, among them The Economist and The Financial Times, have made London their base, at the crossroads of American and continental thinking.
Leading companies in the Entrepreneurial Age don’t emerge from entire countries, and even less so from continents. Rather they emerge from small, dense metropolitan ecosystems. Considering that, once we’ve gone past the backward-looking frenzy, new laws, regulations and good practices could help turn a city like London into the leading entrepreneurial ecosystem in Europe again. Beyond the chaos that many envision for the months and years to come, can the U. K. make the most of the current situation and renew its glorious past?
I work at The Family, an investment firm supporting ambitious tech entrepreneurs in Europe. My 2018 book «Hedge» discusses the urgent need to invent a new Safety Net for our more digital economy. I bring my senior policy experience to my work as a tech investor.
Nicolas Colin, cofounder & director of The Family, author of Hedge: A Greater Safety Net for the Entrepreneurial Age .
