Halloween is here. And we’re still in the EU. Given Boris Johnson’s “do or die” pledge to leave the EU by today, it appears we all picked ‘trick’ rather than ‘treat’. And now we’ve got a general election to look forward to on the 12th December. Far from getting anything approaching certainty, the UK’s high-growth businesses now have an extra dimension of uncertainty to contend with. That includes the prospect of a Corbyn government.
But what does this added uncertainty mean for the UK’s fastest-growing SMEs? If the past three and a bit years are anything to go by, it won’t mean much. These businesses have carried on raising funding, growing, hiring and acquiring. But for those young companies that have yet to prove themselves and secure investment, the road ahead may not be so rosy.
2019 has already seen more investment go to the UK’s startup and scaleup businesses than ever before. That said, the number of deals being done is falling – it actually peaked in 2017. Of course, it’s hard to say whether this being caused by – or even related to – Brexit. Nevertheless, it may cause issues for our future pipeline of investable startups.
The dip in the number of deals completed is most visible at the earliest stages of company growth, Seed and Venture. As we’ve discussed previously, a dip in seed-stage funding –particularly first round raises – is a worrying sign, and one we may not know the full effects of for another few years. What we do know is that the most innovative startups need equity to fuel their growth. If high-potential, fledgling ventures are unable to make their first step onto the investment ladder due to increasing caution amongst investors, then they’ll be left in the lurch and unable to scale.
Overall, we’re optimistic that the fastest-growing companies in the UK still have a very positive road ahead of them. But it seems like trouble may be brewing in the pipeline of future fast growing companies – ones that have extremely high-potential but are yet to secure investment. If these businesses don’t establish some kind of security through this tumultuous period, they may not come out the other side in one piece.