The boss of crowdfunding firm Seedrs has hit out at UK regulators today claiming they are stifling the potential of UK startups, after the firm’s merger with a competitor was blocked last year.
Jeff Kelisky said the Competition and Markets Authority (CMA) and underlying policy from government was still hampering the potential of growth firms to sell up to bigger businesses, and as a result was choking off a stream of companies who want to set up shop in the UK.
“There are active policies to block acquisitions by the big companies of British small technology companies,” Kelisky told City A.M.
“Now, if you were to tell the British investment community and the British entrepreneur community , your path to exit to one of the big tech players is now cut off, you’re gonna go somewhere else, go to France or go to Germany, you’ll go, Estonia, you’ll go to the US.”
Kelisky said that both “structurally and in terms of policy” the CMA and government were hampering the potential of tech firms in the UK.
His comments come after Seedrs had a run in with the regulator last year when its merger with rival Crowdcube was blocked over concerns it would result in a “substantial lessening of competition”. Seedrs was eventually snapped up by US giant Republic in December.
The CMA’s current policy focuses too heavily on the “optics” of a merger rather than the financial brass tacks, Kelisky said, as he called for an overhaul of its approach.
“It’s taking a policy approach to a competitive problem, rather than an economic approach,” he said.
“I would like to see a much greater emphasis on objectively understanding the economics of a merger, or a competitive action, than the optics of what it looks like it could be doing.”
The competition watchdog says that too much market power is concentrated in too few firms however, and intervention is required to prevent firms going under.
“I hear directly from UK businesses who have found themselves in very difficult positions after problematic deals went through, some unable to survive because they can no longer compete and are excluded from key markets, others unable to enter or expand in these markets,” the CMA chief Andrea Coscelli wrote in City A.M. last year.
“While the CMA only blocks around 2% of the deals it looks at each year, being prepared to take that action in a small minority of cases is absolutely critical to protecting consumers, for the economy as whole and for businesses who want a chance to grow and succeed.”
Regulatory restrictions on pension investment are similarly restricting the growth of the space though, Kelisky argues, with high fees for UK funds blocking investment and allowing overseas investors to swoop in.
“Even allowing pension funds, easier access to investing in private, right now is very expensive, and so they don’t,” he said.
“Whereas in the US, pension funds have much greater access to investing in this asset class. So the government should do a lot more.”
Government has been looking to unlock a wave of funding from pension fund by loosening a cap on money management fees. Ministers opened a new consultation on loosening the cap last week after an initial consultation earlier this year.