Investigation into the State of Startup Financing following Brexit

Running head: INVESTIGATION INTO THE STATE OF STARTUP FINANCING
FOLLOWING BREXIT
Investigation into the State of Startup Financing following Brexit
Name of the Student
Name of the University
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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Keywords
BREXIT
MEZZANINE FINANCE
REFERENDUM
REGRESSION
RESEARCH ONION
STARTUP
VENTURE CAPITALIST

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Abstract
The research paper pertains to discuss the status of the start-up financing after the completion
of the Brexit in the United Kingdom. The study focused on the background of the start-up
sector and discussed in the context of the Brexit. A general but detailed overview of the
Brexit has also been given in the paper and supported by the reason of the occurrence of such
an exit of the United Kingdom from the European Union. The discussion of the literature
review has been done of the basis if the effect of the referendum of the Brexit to find the
implications of the activity on the start-up in the economy. It is found that the decision of
Brexit has impacted the start-up industry negatively and positively respectively during 2016
and the later years. However, different effects of the Brexit on the start-up in the United
Kingdom made it necessary to conduct the research on the effect on the start-up financing
after the conduction of the Brexit. The primary research has been done for answering the
question of the research paper. After collecting primary data and conduction analysis of the
data it is found that the start-up financing will improve after the conduction of the Brexit.
However, the recommendation has been made so that the positive effect of the Brexit can be
assured. Along with that future scope of the study has also been discussed.

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Table of Contents
Chapter 1: Introduction..............................................................................................................6
1.1 Introduction......................................................................................................................6
1.2 Background of the study..................................................................................................7
1.3 Background of Start-ups in United Kingdom..................................................................7
1.4 Rationale of the Study......................................................................................................9
1.5 Problem Statement.........................................................................................................10
1.6 Research Aim.................................................................................................................10
1.7 Research Objective.........................................................................................................11
1.8 Research Question..........................................................................................................11
1.9 Research Hypotheses.....................................................................................................12
1.10 Significance of the Study.............................................................................................12
1.11 Structure of the Research.............................................................................................12
Chapter 2: Literature Review...................................................................................................14
2.1 Introduction....................................................................................................................14
Conceptual Framework........................................................................................................14
2.2 Understanding the general concept of Brexit.................................................................15
2.3 Start-up Financing..........................................................................................................16
2.4 Summary........................................................................................................................28
2.5 Gap in Literature............................................................................................................29
Chapter 3: Research Methodology.......................................................................................31
3.1 Introduction....................................................................................................................31

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
3.2 Research Method Outline...............................................................................................31
3.3 Research Onion..............................................................................................................32
Research onion.....................................................................................................................32
3.4 Research Philosophy......................................................................................................33
3.5 Justification for the Chosen Research Philosophy.........................................................33
3.6 Research Approach........................................................................................................33
3.7 Justification for Chosen Research..................................................................................33
3.8 Research Design.............................................................................................................34
3.9 Justification of the Chosen Research Design.................................................................34
3.10 Selection of Sample Size and Sampling Methods........................................................34
3.11 Data Collection Method...............................................................................................35
3.12 Primary Research.........................................................................................................35
3.13 Data Analysis...............................................................................................................35
3.14 Research ethical consideration.....................................................................................36
3.15 Research Limitation.....................................................................................................36
3.16 Time horizon................................................................................................................36
Chapter 4: Result and Discussion............................................................................................37
4.1 Descriptive statistics.......................................................................................................37
4.2 Analysis of correlation...................................................................................................50
4.3 Analysis of regression....................................................................................................52
Chapter 5: Conclusion, Recommendation and Future Work...................................................57

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
5.1 Conclusion......................................................................................................................57
5.2 Recommendation............................................................................................................59
5.3 Future Work...................................................................................................................60
References................................................................................................................................61
Appendix..................................................................................................................................66

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
Chapter 1: Introduction
1.1 Introduction
Brexit is the term that generated from combination of British and exit. The word came
into popularity after a referendum on 26th June 2016 that ensured the decision of United
Kingdom to make exit from European Union as 51.9 percent of the voters voted for the exit
(Freeden 2017). Surrounding the decision of the exit of United Kingdom from the European
Union, scepticism occurred in the future assumptions of the business firms, especially in the
case of start-ups. In addition, the investors became sceptical about investing in the United
Kingdom. This doubt has risen due to the change that United Kingdom might go through in
its policies re that would affect all the industry in positive or negative way. Hence, along with
the big business sectors the Brexit might also affect start-ups (McMeeking 2016). Moreover,
in a country like United Kingdom start-ups are quite common many of the innovative works
are being done by the start-ups. Hence, start-ups are an important part of the economy as they
are the future of the world of economy. In United Kingdom, the start-ups depend on the
employees that are mostly from abroad. Thus, it is also necessary to understand the view of
the abroad employees regarding the Brexit decision.
This research aims to find the effect of the Brexit or United Kingdom’s decision to
leave European Union. Brexit has given rise to various turbulence in the states of the United
Kingdom. In the referendum, majority of Northern Scotland and Ireland voted against the
Brexit, however, when the whole country is considered then the majority found to be voted
for the Brexit (Henderson et al. 2016). Hence, there could be internal conflict among the
member states due to difference in referendum results. This also might affect the business
economy of the country. Therefore, to understand the entire start-up industry financing it is

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INVESTIGATION INTO THE STATE OF STARTUP FINANCING FOLLOWING
BREXIT
necessary to consider and compare the start-up industry in United Kingdom before and after
Brexit.
1.2 Background of the study
The United Kingdom wanted to leave the European Union because of various factors.
Important among the factors are immigration or migration and ineffective policies to solve
economic problems (Wadsworth et al. 2016). With Brexit the people of United Kingdom who
voted for it thought that the United Kingdom government would have the own control over
its internal affair as they do not have to abide by the terms of the European Union for taking
any steps to solve any type of social, political and economic issues. However, the immediate
effect of the Brexit on the United Kingdom was not appreciable. The economy suffered from
various negative factors such as increase in inflation and decline in income, while in the long
run the country might face decline in per capita income and the economic growth of the
country may get stunned. Hence, negative effect on the economy should affect the players
operating in the economy, and thus there is a clear possibility for the start-ups to suffer from
the Brexit (Galsworthy and Davidson 2016). Therefore, such effects and predictions
regarding the economy of the country have made it essential to study the case of the start-ups
in United Kingdom.
1.3 Background of Start-ups in United Kingdom
The start-ups in United Kingdom have increased exponentially over the years. In
2015, the number of start-ups established in United Kingdom was 608, 000, and the number
of established start-ups in 2016 was 660,000 (Ft.com 2017). Thus, it is evident that the
growth of start-ups in United Kingdom was quite high before Brexit. The growth of start-ups
have high globally even in developing countries (Acs, Szerb and Autio 2015). The United
Kingdom has always been the hub of start-ups. The top start-ups of United Kingdom are
Bulb, Simba, Mous Products, Pip & Nut, Elder Technologies, Climb Online, Syft and many