How might the Brexit impact UK start-ups access to markets, talent and capital?

1. Property of Frog Capital
Not to be distributed without agreement
September 15th, 2016
Brexit – possible implications for UK start-
ups and their funders

2. Who is Frog Capital?
• Pan-European growth capital investor
• Typically invest €3-10m in funding rounds of up to €20m
• Tech driven disruptors with some market traction and fast growth (>40%)

3. Brexit – four possible scenarios
Current uncertainty, but some precedents exists
i. Full access to single market, but obliged to accept majority of EU laws, free
movement of labour and capital applies (EEA member)
ii. Access to EU market via series of agreements, but excl. financial services, need
not apply EU laws, must adopt some EU regulations to enable trade, free movement
iii. Trade agreement covering some but not all trade areas (partially excluding
financial services), introducing additional regulation protecting bilateral trade
iv. Customs union only, meaning Turkey benefits from abolition of tariffs with
EU, but has to accept external EU tariffs and regulations

4. Brexit
What does this mean for UK start-ups and
their financiers?

5. Access to markets: EU and beyond
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6. Access to markets: EU and beyond
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• About half of UK exports are with EU
• BUT: Brexit does not mean this will all
be affected
• AND: A recent survey among start-ups
ranked access the British, the US and
Chinese markets as most important
• Most challenges can likely be
addressed without paying tariffs
Source: HMRC, Compass Group

7. Access to markets: EU and beyond
7
• About half of UK exports are with EU
• BUT: Brexit does not mean this will all
be affected
• AND: A recent survey among start-ups
ranked access the British, the US and
Chinese markets as most important
• Most challenges can likely be
addressed without paying tariffs
Source: HMRC, Compass Group
• Access to all major markets,
only small exceptions
• Some major sectors excluded
• Often addressed by subsidiaries
• CETA sets transparent rules
for most major markets
• Access to most markets of
physical goods
• Other sectors subject to WTO
standards

8. Access to talent
8
Source: [ ]

9. Access to talent
9
Source: [ ]
Source: Compass Group

10. Access to talent
10
Source: [ ]
• Effectively no limitations at the
moment
• Visa regulations apply, but favour the
skilled and qualified
Source: Compass Group

11. Access to talent
11
Source: [ ]
• London remains attractive, e.g. language advantage
• Likely to be a compromise for highly skilled workers similar to those
existing for non-EU nationals, e.g. dependence on existing job offer
• Effectively no limitations at the
moment
• Visa regulations apply, but favour the
skilled and qualified
Source: Compass Group

12. Access to capital

13. Access to capital
• European Investment Fund (EIF) is
invested in c33% of all European VCs
• EIF represents 10% of EU VC capital
• Currently stipulates that the GP has to
be based in the EU
• Uncertainty about future position
Source: EIF

14. Access to capital
• European Investment Fund (EIF) is
invested in c33% of all European VCs
• EIF represents 10% of EU VC capital
• Currently stipulates that the GP has to
be based in the EU
• Uncertainty about future position
Source: EIF
Top destinations of EIF investments ’08-’14
1. London
2. Paris
3. Cambridge
4. Berlin
5. Munich
Source: EIF

15. Access to capital
• European Investment Fund (EIF) is
invested in c33% of all European VCs
• EIF represents 10% of EU VC capital
• Currently stipulates that the GP has to
be based in the EU
• Uncertainty about future position
Source: EIF
Top destinations of EIF investments ’08-’14
1. London
2. Paris
3. Cambridge
4. Berlin
5. Munich
Source: EIF
• Retreat of investors likely to be only small scale given importance of UK ecosystem
• While future EIF is uncertain, there will be no impact in the near-term
• Turkey contributes to the EIF, hence the EIF can contribute to funds investing in Turkey

16. Conclusion
• Success of individual start-ups is unlikely to depend on post-Brexit regime
• While there is some uncertainty before the future relationship with the EU will
be finalised, cooperation remains in the common interest
• Existing precedents suggest that London will remain Europe’s pre-eminent start-
up hub

17. Jens Düing
jens.dueing@frogcapital.com
17