The best startups are caught in Britain

The International Monetary Fund tends to the United Kingdom fall into a slumpInflation remains high, and there is an appreciable gloom about the UK’s economic prospects. One bright spot stands out though: the UK’s growth as a hub for startups and entrepreneurship. The amount invested in British startups has grown exponentially over the past decade, from £1.6 billion in 2011 to nearly £28 billion in 2021. London is the number one destination for venture capital in Europe, with its startups raising twice as much money as it manages. Their peers are in second place in Paris, and trail only Silicon Valley and New York globally. There is only one problem with this success story: Britain’s best startups are being poached.

The turmoil in the broader economy means that the UK’s once fertile project market is drying up. Last year was the first ever that the amount of money invested in startups decreased. In contrast, companies abroad look for money, and find that it often comes with conditions associated with relocation.

The US Enterprise Market offers a special fee. Silicon Valley is the undisputed startup capital of the world, New York is a bigger financial center than London, the US consumer market is bigger and richer, and US investors are happier to give startups more money for riskier projects. We’ve always been in danger of losing our best startups to American investors who want to be near the companies they help build. Europe is also getting in on the act. European funding bodies still give money to British companies for scientific projects such as drug development and space exploration; They are only asking to transfer operations to an EU country to continue their business.

We are now in danger of seeing a generation of founders lured abroad. In response, you would think that the government would do everything possible to get us back on track. He does anything but. Of particular concern to some of our country’s most innovative entrepreneurs are Karam’s planned cutbacks Research and development tax credits. These stimulate investment in the development of new goods and services, and have been integral to promoting cutting-edge innovations. Due to come into effect in April, research from Coadec suggests the overhaul will cost the average startup £100,000. Combine this with a high corporate tax, general government hostility to tech companies, and a poor outlook for domestic investment, and it’s no surprise that companies are leaving.

Startup founders are not like the rest of us. They are dedicated to the businesses they are trying to build, and are happy to move around countries to make it a success. While only 14% of Britain’s population is foreign born, 49% of the fastest growing companies in the UK have at least one foreign-born founder. Anecdotally, many of them are here because the UK is the best place for them to grow their business. When that stops, they’ll move on — taking the promise of jobs and more inward investment with them

We’ve already seen this process play out with Estonia. A small country on the edge of the Baltic Sea, it boasts the largest number of billion-dollar startups founded per capita. But while Estonia clearly has it enviable levels Entrepreneurship has a population that is too small and too far from other tech hubs to provide the necessary ecosystem to sustain startups. As a result, many of them go viral. Looking at the 10 Estonian startups valued at more than $1 billion, only two of them, Bolt and Verev, are still in the country. Skype is now based in Luxembourg, Gelato has moved to Norway, and Playtech to the Isle of Man. Zego and Wise (formerly TransferWise) are based in London and, Pipedrive and Glia are based in the USA.

We should be proud of our startup ecosystem, but we should also remember that the competition for our companies is global. Capital goes to the best companies, and founders to the best opportunities. Britain is in danger of losing its edge – and its start-ups like Estonia.

Arya Babu is the Head of Policy at Entrepreneur Network

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