Funding tech start-ups: impact of Brexit

The UK leads Europe in the creation of unicorns. When a phrase like this appears in a government news report, some context is called for.

Last month, the government proposed a new National Investment Fund for innovative UK firms. 4% of cutting edge start-up firms valued over $1 billion, known as unicorns, are based in the UK, but 54% are based in the US. By bridging the funding gap behind this, a National Investment Fund would make UK unicorns less rare.

HM Treasury also acknowledges that ‘a new UK based fund would help ensure that firms still have access to the funding they need, should our relationship with the European Investment Fund end when the UK leaves the EU.’

But it seems our relationship with the EIF is iffy already. Europe halts funding for British technology firms, declared The Times in a recent headline. It went on to report: ‘Venture capital funds say they have been told that the EIF has now effectively turned off the tap to new British commitments.’

The EIF exists to support small and medium sized enterprises (SMEs) by improving their access to ‘risk capital’ through a wide range of selected financial intermediaries. It provides financial support to lenders, typically banks, to offer high risk loan products to SMEs where traditional security is not available to the lender. It also invests in funds specialising in taking higher risk equity stakes in SMEs.

The EIF has been indirectly responsible for more than half a billion pounds’ annual investment in Britain’s technology sector. What happens until the government’s investment fund is delivering much needed risk capital to the industry?

Assessing other funding options

For the time being, if you have a technology SME, you will have to revert to the traditional forms of finance to get your business off the ground or through the growth phase. Based on our expertise in the sector, here’s our assessment of the other options available to you.


This has proved hugely popular with tech start-ups in the past few years. The terms offered to investors are varied, sometimes unusual and often involve giving away only the product or service being developed.

It is typically for smaller amounts of seed funding rather than serious fund raises and is great for profile raising. Often the most popular campaigns are where the start-up is offering a consumer friendly proposition rather than a more complicated business-to-business one.


Another model which has seen big growth in the past few years: a huge number of regional and international programmes are run by both independents and – more interestingly – larger corporates. The corporates see these programmes as a way to access a pipeline of potential disrupting technologies in their sectors.

Funds offered in these programmes are often small, but instead you get office support and mentoring that would otherwise not be available.


Angels are often a very popular source of funding. Because they offer not just cash but more personal and relevant experience from successful entrepreneurs, they provide excellent support to these businesses. With the credibility of angel investors, your ‘Series A round’ of financing will often be easier. There are a number of regional angel networks (not to mention Dragons’ Den).

Venture capital

This remains an important source of growth capital for technology businesses, often a Series A round and beyond rather than initial seed capital. This is a tried and tested route which has many pros and cons and will not suit all, or indeed be available to all.


With EIF backing drying up, bank lending to technology start-ups will be harder than ever to access. With the security banks require rarely available from the borrower, banks have an obligation to lend responsibly and will be most unlikely to help.

You will often find banks running their own accelerator programmes in an attempt to keep this pipeline of potential customers coming.

Funding in the future

The decision by the EIF is not a good one. But in the longer term, it should create an opportunity for the government to develop a more versatile scheme, providing more access to important funding for UK technology businesses. Professionally speaking, we won’t be the only ones dreaming of unicorns.

In the meantime, BKL’s specialists in the technology and digital sector are here to help you. For more information, please get in touch via your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


By submitting this form, the data provided will be used to perform your request according to our privacy policy.