Monday 1 August 2016 4:09 pm

How startups seeking funding suffered from investor referendum jitters

Startups and high-growth companies seeking investment suffered in the run-up to the EU referendum, a new study suggests.

The Deal report from Beauhurst, which monitors equity fundraising secured by private companies in the UK, tracked 557 deals completed, and announced, in the first half of 2016 – down 22 per cent from the second half of 2015.

The report also found a decline in deal numbers through the period, starting with 98 and 99 in January and February respectively, and finishing with 84 and 81 in May and June.

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“While it is difficult to establish clear correlation, the notable decline in equity fundraisings in the run up to the referendum could well have been caused by a wait-and-see approach from entrepreneurs and investors alike,” the report said.

“As we await prolonged and fairly largescale political and economic changes around Europe, we believe it is likely that investments across the UK will continue to fall in the second half of 2016.”

Beauhurst also highlighted how the number of crowdfunding deals completed during the period was down 17 per cent period on period to 158. It said this was the first time it had tracked a decline in the crowdfunding deal area.

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Asked why crowdfunding numbers were in decline, Beauhurst head of research Pedro Madeira pointed to the EU referendum and how investors in this area may react quickly to referendum uncertainty.

He told City A.M.: “Institutional investors, like private equity and [venture capital], have their own pot of money that [investors] have already committed money to. And therefore those guys know that they have that money there to play with for a number of years – they don’t have to make knee-jerk reactions.

“Whereas if there’s a typical person that puts money into a crowdfunding campaign, you don’t really have a budget as such to do it. If in a certain month, you overspent on a TV or a holiday, next month you could just say… forget it, I’m not going to put any money into equity crowdfunding this month.”