A hard Brexit won’t affect UK tech sector, says top VC

The UK's identity as a tech start-up nation has only deepened post-referendum. MMC Ventures managing partner Bruce Macfarlane explains.

Last year’s referendum has set a lot of wheels in motion. Despite uncertainty around what Brexit will ultimately mean for the UK, given that the government is yet to officially announce its stance on issues like how visas will be awarded for foreign talent, start-ups within the technology sector have been thriving.

According to industry experts, the UK’s identity as a tech start-up nation has only deepened post-referendum. 80 new companies are born every hour, and recent figures gauge the value of the digital technology industry at £161 billion, with revenue generated by 58,000 technology businesses nationwide. This sector of the UK economy grew 32 per cent faster than the rest of the nation between 2010 and 2014, and currently and employs 1.56 million people.

Underscoring this, and contrary to the pre-referendum sentiments of over 200 entrepreneurs of growth companies, the fact remains that continued uncertainty and potential volatility have done little to deter investors.

MMC Ventures managing partner Bruce Macfarlane believes the growth opportunities outweigh anything else. “Brexit is not going to effect the tech sector, even if it’s a hard Brexit,” he tells GrowthBusiness.

“The only thing we worry about is recruiting talented people outside the UK and bringing them, so were hoping the government will be sensible about that. There’s so much talent in the UK (tech sector), we want to be part of that journey.”

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Going for growth

MMC Ventures ramped up its portfolio in 2016, and recently announced internal promotions to keep pace with its growth. This week, the firm announced internal moves as it promoted two new partners – Simon Menashy and Ameerul Miah, and added to its executive team, promoting Victoria Ferguson to general counsel, and Anna Slemmings to director of marketing and investor relations. Macfarlane says that the firm aims to continue its growth as it looks to hire another associate and a senior team member this year. “We’re also talking to the CEO of one of my companies who has recently exited and is free. We’re discussing the idea of him joining our board. It’s something we’re open to,” says Macfarlane.

“We’re investing significantly in great companies, so we need to expand the team. Our typical style is to recruit people from blue chip organisations who’ve been well trained, and help them grow internally. We’re very proud of that heritage,” he adds. “Jon (Coker) is a great example of this. He joined the team as an associate and now he’s managing partner.”

For Coker, the way MMC works mirrors the growth mindset of the companies it backs, “no glass ceilings, no fund cycles and no (siloed) knowledge or networks.”

Backing a team

When deciding to invest in an early-stage business, Macfarlane’s biggest area of focus is the way the management team is structured and how they work. “The team is terribly important. We like to think that we’re backing the team rather than just the entrepreneur. We need to bear in mind that VCs are fundamentally minority investors, so we don’t control these companies. We’re in partnership with the entrepreneur and the team. It’s about building a position of trust and agreeing on a plan for the company, and how it can grow.”

Some of the things he looks at includes whether the MMC team can work well with the start-up team, according to Macfarlane. “We think very carefully about can we work with this team and entrepreneur. We’ll do all we can to strategically help these companies, so we’ll need to figure out if they’re going to listen to us, take help when they need it, and so on.”

A focus on AI

In 2016, MMC saw two exits from its portfolio, including the sale of Breathing Buildings to Volution Group, and a combined raise of more than £78 million for MMC portfolio companies. MMC plans to invest another £100 million over the next few years to help scale up digital businesses across Europe.

A little over a year ago, MMC Ventures created a new unit within the firm, MMC Insights, which Macfarlane describes as a research-led operation. “MMC Insights looks closely at specific sectors and identifies companies that we might like to get to know and ultimately invest in. That has also been generating significant deal flow for us,” he adds.

The firm’s most recent sector focus is artificial intelligence (AI), says Macfarlane. “We mapped out every early-stage AI company in the UK and that’s just the beginning. We’re planning to speak to almost every one of these businesses.”

Innovation is one area that will remain unfazed, Macfarlane concludes, going back to the Brexit question.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

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