Earlier this month, London- and Tel Aviv-based VC firm 83North closed its fourth fund at $250 million. We sat down with investing partner Laurel Bowden to discuss her investments and the likely effects of the Brexit negotiations on the UK’s VC and startup ecosystem.
The referendum to leave the EU has caused a lot of uncertainty and in some cases led to investments being put on hold. What’s your take on VC and startup prospects in the UK?
We are very bullish on the UK, our offices are here and in Tel Aviv and we have no intention of changing that. The UK is clearly the main tech hub in Europe and that’s not going to change any time soon. London, in particular, has been very open to foreigners and has created an environment in which it’s easy to do business.
However, what I do think will happen is that the ongoing Brexit negotiations will stimulate tech hubs in other parts of Europe. In fact, there is already evidence of this happening, where a degree of uncertainty is leading some startups to hire in their EU subsidiaries rather than add to the existing team in London.
Has including ESG become a necessity for investors?
Also, for fintech in particular—and I am seeing this with several of my portfolio companies—regulatory requirements around euro money licensing are likely to intensify this trend, where UK-based startups need to establish EU-based subsidiaries in order to continue doing cross-border business.
How mobile are startups? What can other EU capitals offer that the UK can’t?
Moving a company, regardless of size, is never easy and not something founders are particularly keen on doing. Having said that, I am seeing a trend where companies which are expanding are not hiring in the UK but rather adding to their EU hubs. So no, I don’t envisage mass relocations but certainly a level of hiring happening elsewhere in Europe. But then you always must think of what you are losing out on, by not hiring UK talent or doing business in a country that perhaps hasn’t got such an established ecosystem.
Do you foresee a regional sector breakdown where, for example, fintech companies will gravitate toward Amsterdam or Dublin?
Well, if you are a fintech startup you are probably not going to locate south out of Barcelona. Amsterdam could be attractive for fintech, whereas Berlin will attract more consumer-related startups. In Munich, on the other hand, we see a strong software bias. And then there is Stockholm, which is very broad with pretty much all sectors established.
What sort of companies are you currently looking at?
We are actually looking quite broad. In Israel, we continue to look at a lot of security and data companies. We were in Just Eat and continue to look at food-related companies; we haven’t been particularly active but I still think that sector is interesting.
Ecommerce-related software is also interesting—we are in Mirakl and Celonis for example. But we are always looking at new areas, be that driverless cars or AI. I have done a lot in business intelligence and ecommerce software and I continue to look at that.
What sort of deal size?
We’ll typically make anything from $1 million seed investment up to $15 million. We are naturally very selective and won’t be doing hundreds of seed investments and it’s always going to be technology and software related.
Article by Eric Burg, PitchBook